WiseTech cuts earnings forecasts on coronavirus fallout

WiseTech shares slump after it cuts forecasts because of the coronavirus, which may also delay new products.

Wisetech CEO Richard White. Picture: Britta Campion

Local tech unicorn WiseTech Global has had more than $2bn wiped off its books on the back of an earnings downgrade, as the coronavirus outbreak wreaks havoc on global trade and the logistics industry.

WiseTech’s stock slumped more than 27 per cent after the company trimmed its full-year 2020 guidance and told shareholders that the manufacturing slowdown in China was taking a toll on its core logistics service provider customers.

The software maker trimmed its 2020 financial year numbers, with revenue to now land between $420m to $450m and earnings before interest, tax, depreciation and amortisation set to come in at $114m-$132m. It had previously forecast revenue at $440m-$460m, with EBITDA at $145m-$153m.

WiseTech’s stock ended the session down $8.04 at $21.40. The shares were priced at $3.35 at its IPO in April 2016 and hit a peak of $38.80 last year.

Founder and CEO Richard White told The Australian the impact of the coronavirus on global supply chains was likely to be short lived. “I don’t think this thing will last very long, China will act decisively to get manufacturing back on track as quickly as possible,” he said.

“This isn’t just a China problem, this is a global problem and across the industry almost every freight forwarder is affected.”

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Apple has already cited the coronavirus as the primary reason it won’t meet its revenue projections for the current quarter, saying the outbreak would limit iPhone production and the demand for its products in China.

Locally, fellow tech unicorn Altium has also cited coronavirus as a factor in saying its full year numbers would land at the lower end of previous guidance.

Mr White is optimistic things will get back in shape quickly once the Chinese government is successful in containing the virus.

“This is nothing more than a delay for us and when the recovery does happen I think the rebound will be swift.”

The earnings downgrade took the shine off an otherwise bright first half for WiseTech, with revenue for the half-year ended December 31 growing 31 per cent year-on-year to $205.9m.

Net profit surged year-on-year, from $23.1m to $59.9m. The numbers were buoyed by both new and existing customers of its CargoWise platform, which is active in 150 countries, and the 14 acquisitions it made in fiscal 2019.

WiseTech came under pressure last October after short-seller J Capital took aim at its financial fundamentals. Beijing-based J Capital’s two reports, which wiped $2bn off the software firm’s value, alleged it was overstating reported profit and took aim at WiseTech’s track record of integrating the businesses it bought globally.

“The company has been cobbled together through hasty acquisitions,” J Capital said.

Growth through acquisitions has been a key feature of WiseTech’s playbook, the company buying 34 customs and logistics software companies since its $170m landing on the ASX. It pulled off its latest buy in January, picking up Switzerland’s SISA Studio Informatica for $15.5m.

Mr White said WiseTech’s appetite for acquisitions would be more tempered this year. It declared an interim dividend of 1.7c per share, fully franked, compared with 1.5c a year ago.