This article was in the AFR this morning.
Analysts asleep: Corporate Travel's bogus cash flow graph
By
Joe AstonFeb 25, 2019 — 11.00pm
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.
We said
our piece last week on Corporate Travel's 1H19 slippery cash flow (down 28 per cent and only 44 per cent of normalised EBITDA – substantiating the shameless fudge of Pherous's 2H18 numbers – or 79 per cent over the past two halves, all in the momentary visibility afforded by the company's much vaunted but equally momentary pause in acquisitions). Cash is king, and Pherous isn't organically growing it.
Though it must be said that Pherous has carried investor sentiment on his company's inherently dubious cash profile. His approach to persuasion has resembled that of Professor John Nerdelbaum Frink, Jr of
The Simpsons. "It should be obvious to even the most dim-witted individual who holds an advanced degree in hyperbolic topology," he scolded an already bamboozled Ned Flanders, Reverend Lovejoy and Chief Wiggum.
Jamie Pherous of Corporate Travel David Rowe
On Page 21 of Corporate Travel's
results presentation last week was a graph entitled "Cash Balance Swings ($m)" beside a sizeable bank of commentary headlined "Timing Differences Explained". The chart is simply a blue line (defined as "daily cash balance movements") with three dots marking the "half year reporting date". So the graph has no Y axis! Rendering it, well, meaningless; the equivalent of a Zimbabwean Newspoll.
As
put in
Calling Bullshit, a course offered at the University of Washington, "We would have thought this obvious, but a line graph should have something numerical on each axis... When you look at data graphics, you want to ask yourself whether the graph has been designed to tell a story that accurately reflects the underlying data, or whether it has been designed to tell a story more closely aligned with what the designer would like you to believe." Or to quote the Wikipedia
entry for "Misleading graph", "the use of biased or loaded words in the graph's title, axis labels, or caption may inappropriately prime the reader."
Appended to the title of Corporate Travel's cash graph is a hash (not asterisk) symbol disclaiming that its depicted data are an "illustrative example only". As in, completely made-up numbers. Less a Jedi mind trick, more Mr Squiggle.With hedge funds picking holes in both his cash flow generation and conversion, Pherous has discredited the disbelievers with…a vivid diagram whose one already worthless input is numbers that don't even exist. And until now, nobody has noticed.
We saw Powerpoint art like this back in March 2015, courtesy of Slater and Gordon. Justifying their Quindell acquisition, the listed lawyers produced one "illustrative" slide and then another depicting snowballing growth in both case intake and settlement volumes at Quindell on… only one axis. Neither of which was actually occurring. Recall how that ended? Or who lifted the lid on it?
That explains it (not): a graph from Corporate Travel's half-year presentation. Corporate Travel Management
(20min delay)