Shares in logistics solutions provider WiseTech (ASX: WTC) have risen 32 per cent to $27.51, hitting their highest levels since a February crash when FY20 guidance was cut by 17 per cent due to the onset of COVID-19.
Today the group founded by former music executive Richard White reported an EBITDA of $126.7 million, above the midpoint of guidance and representing year-on-year growth of 17 per cent.
The increase in NPATA was not as pronounced at 3 per cent to reach $64.6 million, with WiseTech attributing the difference to increased depreciation and amortisation expenses due to greater R&D investments and new product development.
A slowdown in the movement of goods led to volatility in global logistics markets from late January through to May, but WiseTech started to see signs of moderate recovery in June.
User numbers for the Sydney-based company's CargoOne logistics software platform were close to pre-COVID levels by the end of July, giving the board the confidence to forecast optimistic revenue and profit guidance for FY21.
The company expects EBITDA to rise by 22-42 per cent to a range of $155-180 million, along with a 9-19 per cent rise in revenue to $470-510 million.
"The COVID-19 challenges faced by the global logistics and supply chain sectors are accelerating the longer term trend towards consolidation and integration," says White.
"Within this environment, we are seeing increased demand amongst large global logistics service providers for our technological and digital solutions that drive efficiencies and productivity improvements.
"WiseTech is ideally placed to address this growing demand, with our logistics execution technology and 40 development centres delivering seamless, global capabilities that improve productivity, functional depth, data integration and visibility, regulatory compliance and value for over 17,000 customers worldwide."
This bullish outlook has pushed the WTC share price closer to the $29 mark they were trading at on 19 February before a frenzied sell-off, likely giving some investors déjà vu of movements that followed a short seller report from J Capital in October last year that wiped billions from WiseTech's value.
J Capital has made repeated criticisms of WiseTech. In its most recent report in June the fund's co-founder Anne Stevenson-Yang raised doubts about the acquired business Containerchain, which she believed to be "bleeding accounts" as a "loss-making business that could now potentially collapse".
"The total of $97.6 million in cash that WiseTech paid in early 2019 was clearly too rich for this company, whose revenue we now expect to halve in next financial year while losses increase as customers abandon the platform," Stevenson-Yang said.
In its reports today, WiseTech notes Containerchain contributed $4 million to group revenue and around $100,000 in net profit from the date of the acquisition. The Goodwill on Containerchain has been reduced by $10.6 million, while for other acquisitions it is down $23.5 million.
These numbers are significantly lower than Stevenson-Yang's warnings for investors to expect goodwill write-downs of around $200-300 million.
In contrast, the company has reported a non-cash, non-taxed fair value gain of $111 million generated as a result of the renegotiation of acquisition earnout obligations and adjustments in the first half of 2020.
In her report in June, Stevenson-Yang alleged Wisetech was trying to sweep its failed acquisition strategy under the carpet by writing down earn-outs without writing off the equivalent item - goodwill.
"WiseTech frantically rid itself of 40 per cent of the earn-outs from 17 poor-performing acquisitions in May," she said.
In its report today, WiseTech highlighted a "robust" financial position and explained COVID-19 provided the impetus for WiseTech to renegotiate and completely or partially close-out 22 acquisition earnout obligations.
"These close-outs included the replacement of various cash payouts with equity resulting in improved overall liquidity and better alignment of the acquired businesses to the company's objective of accelerating technology development and improving commercial efficiency."
The company also reported today that 29 per cent of its revenue growth in FY20 came from acquisitions, mostly driven by the full-year impact of 14 acquisitions in FY19 and five acquisitions in FY20.
Updated at 3:06pm AEST on 19 August 2020.
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