Greensill Capital profit falls as IPO nears for SoftBank-backed financial giant
A billionaire Queensland richlister says he is “pleased” with his global company’s financial performance despite net profit slumping by 30 per cent. Here’s why.
A costly expansion strategy and large increase in employee numbers has cut profits at the global supply chain finance group headed by Australian billionaire Lex Greensill.
The rising costs offset what was a big increase in revenue for Greensill Capital, according to documents lodged with the corporate regulator on Monday night.
Greensill’s financial accounts for the 2019 calendar year – the latest available report – showed the global firm’s revenue increasing 76 per cent to a record $US476m ($618m) for the year, though earnings before interest, tax, depreciation and amortisation and net profit both fell compared to 2018.
The firm, which specialises in paying the invoices of the suppliers of its clients promptly and collecting the money from the clients later, almost trebled its employee numbers during 2019, but EBITDA fell 12 per cent to $US65m and net profit dropped almost 30 per cent to $US34.7m.
But Mr Greensill said in the report that he was “pleased with the group’s financial performance”, given that the EBITDA fall was “mainly driven by our heavy investment in the business, adding skilled new employees and increasingly more sophisticated technology and business processes.”
Administration costs for the group rose from $US120m to $US287m and impairment expenses were up almost $US30m to $US47m.
The company had previously recorded a trebling of profits in 2018, compared with the previous 12 months, in what was also a big year for growth.
Greensill’s latest financial results come as it prepares for an initial public offering in 2021, potentially on the ASX, and a pre-IPO capital in the first quarter raising worth up to $US600m ($800m) that could value the company at $US7bn.
The three Greensill brothers – Lex, Andrew and Peter – currently own about 35 per cent of the company, which was founded in 2011 and forms the basis of their estimated combined wealth of $2.25bn on The List – Australia’s Richest 250.
Greensill Capital earns fees on the transactions with its clients and funding it via bond issues, and has attracted backing from private equity firm General Atlantic, which invested $US250m in 2018, and Japanese conglomerate SoftBank’s Vision Fund, which invested nearly $US1.5bn in 2019.
Mr Greensill recently told The Australian he is “carefully considering” Australia for its multibillion-dollar sharemarket listing as it works on a pre-IPO capital raising, which will be used for acquisitions and to expand his firm’s rapidly growing consumer business, which allows employers to give staff access to their wages during a pay cycle at no charge.
The company said it loaned about $US200bn to customers and suppliers across 175 countries last year, about $US25bn of which was to the agriculture sector.
Greensill also recently emerged with a 5 per cent stake in Katerra, a US construction start-up that ran into financial problems as it tried to shake up the building industry.
A recent report in The Wall Street Journal said SoftBank had agreed to invest $US200m more to bail out Katerra, on top of the $US2bn it has already invested.
As part of the funding package, the SoftBank-backed Greensill reportedly agreed to cancel about $US435m in debt owed by Katerra in exchange for a roughly 5 per cent stake in the company.
Greensill’s 2019 financial report also revealed it had paid about $80m in cash and deferred consideration for the Finacity Corporation Group, a US-based receivables securitisation business, and another $5m UK startup FreeUP, now folded in another acquisition for Earnd.
The Sydney-based Earned is a fintech company that has developed technology that allows staff of employers who sign up to the service to access a portion of wages before their usual payday.
Greensill has had to weather a storm of criticism about its model in the past year. The use of supply chain finance programs by big listed companies CIMIC, Telstra and Rio Tinto in Australia attracted criticism from Small Business Ombudsman Kate Carnell, who argued the big companies were using the practice — also known as “reverse factoring” — to push out payment terms.
Greensill has defended its model as helping to improve the cashflow of small suppliers and has said it will refuse to do business with companies that misuse his products.
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