WiseTech founder Richard White takes control of tech group
The financial regulator has begun a probe into WiseTech after the dramatic appointment of Richard White as executive chairman, which allows the company founder to tighten his grip after a boardroom exodus.
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The financial regulator has launched a probe into WiseTech after Richard White seized control of its board, with the tech tycoon dismissing fallout over his conduct even as investors flagged fresh governance concerns.
The new title of executive chairman hands Mr White, who founded the tech company with Maree Isaacs in 1994, unprecedented control over its strategic and operational direction in a consolidation of his power across the chief executive and chairman roles.
His audacious power grab followed barely 48 hours after four directors, including the chairman, dramatically quit due to “intractable differences” in the board and disagreement over the future role of Mr White.
The Australian Securities and Investments Commission has been monitoring WiseTech since October last year. On Wednesday, its chairman Joe Longo said he acknowledged “concerns relayed in media reporting”.
“We are conducting preliminary inquiries and will be making decisions imminently about any next steps for ASIC,” he said.
Mr White attempted to quell concerns over corporate governance amid allegations he exchanged business advice for sex.
“First of all, the issues that you’re referring to are uniquely an Australian issue,” he said when asked about the impact by one analyst. “They (international customers) don’t think about this market or these governance issues in Australia, they think about what is right for them for their product and their business.”
However, one of WiseTech’s top investors said there were major issues for the company to answer.
“There is significant work ahead for WiseTech to restore investor confidence,” Hesta’s head of portfolio management, Jeff Brunton said.
“This includes the return of a majority genuinely independent board, the delivery of a clear succession plan, and substantive disclosure of key findings from the board-commissioned reviews alongside proposed actions to safeguard a strong and respectful culture.”
The Australian Council of Superannuation Investors also weighed in over the corporate crisis.
“Investors remain in the dark regarding the findings of two board governance reviews and the crucial question of what prompted the resignation of directors on Monday. Investors are eager to understand the outcomes of the board governance reviews,” ACSI’s executive manager of stewardship, Ed John said.
Interim CEO Andrew Cartledge spoke publicly for the first time on Wednesday since the company’s investor day in December last year, when he admitted that he and Mr White didn’t always see eye-to-eye.
On an analyst call, Mr Cartledge attempted to calm investors, telling them the company had received “no negative sentiment” from customers over Monday’s bombshell announcement about its board.
“We’re in constant contact with our customers, both large, medium and small. And you know at the moment there is very little reaction. They are waiting for today, for results and further updates,” he said.
“And so we’ll continue to stay engaged, as we always do with our customers (and) understand how they’re feeling. But there’s been no negative sentiment at all.”
WiseTech would not comment further on the matter, he said, but added “the (issues) needed to be properly managed” and were “not to be discounted”.
Mr White was also active on the investor call, including a personal plea to shareholders that he remained committed to the company.
“I wanted to let you know that I am fully engaged and here for the long haul with invigorated vision, passion and a trove of new ideas to continue to build the company that Maree and I created that I love so much,” Mr White said.
“You have my absolute commitment to do everything within my power and ability to accelerate the business you have invested in and that has been so successful over the almost nine years since listing.”
The company faces mounting pressure to release the contents of a final report into the behaviour of Mr White, with RBC analyst Garry Sherriff telling management it needed to be made public to boost transparency given the “heightened focus” on governance from institutional investors.
Two further allegations about Mr White’s behaviour were made to WiseTech this month from a staff member and a supplier to the company.
They follow a string of sensational allegations about his conduct, including allegations that he had offered business advice in exchange for sex late last year.
WiseTech engaged two law firms, Seyfarth Shaw and Herbert Smith Freehills, to examine Mr White’s behaviour amid the allegations.
In November, WiseTech told investors that lawyers conducting the review into Mr White’s behaviour had so far found “no evidence” of misconduct, attributing his behaviour to “creative abrasion”.
On Wednesday, WiseTech said an update on the status of the report, originally due for release on Wednesday, would now be provided to the market in mid to late March.
But Mr Cartledge declined to respond to go into detail when asked by Mr Sherriff and referred him to the report timeline already announced in an ASX statement on Wednesday.
“I’m not going to comment on that past what was in the announcement this morning,” Mr Cartledge said. “I think it was pretty clear and self-explanatory.”
WiseTech announced Mr White’s appointment just minutes before it was due to deliver its half-year results to investors on Wednesday. The company also cancelled planned media interviews that had been set to accompany the results.
“The executive chairman will, in conjunction with the nomination committee, oversee succession planning including completion of the internal and external search process for a permanent chief executive officer,” the company said.
WiseTech confirmed remuneration for the role would not exceed Mr White’s previous salary, which has remained at $1m annually since 2014.
Mike Gregg, a former long-time board member, has been appointed lead independent director.
WiseTech is expected to make at least one further board appointment within the next four weeks.
The company’s share price, which had fallen more than 22 per cent across Monday and Tuesday, rebounded by 2.1 per cent to $96.50 on Wednesday. The week’s early market rout had shaved $9.15bn off its market capitalisation.
Investors have been desperate to uncover “what has fundamentally changed” at WiseTech after four independent directors – including chair Richard Dammery, Lisa Brock, Michael Malone and Fiona Pak-Poy – suddenly quit the company in protest over now-ditched plans for its founder Mr White to take a $1m a year consulting role.
The company has been heavily criticised for its failure to implement a succession plan. Its share price has tumbled as investors were left in the dark over who would assume control of the $31.6bn company, in which Mr White holds a 36.7 per cent stake.
WiseTech reported on Wednesday that its revenue rose 15 per cent to $US381m ($600m) for the six months to December 31 – beating consensus at $US380m – the majority of which came from its CargoWise product which brought in $US331.7m. Underlying earnings jumped 28 per cent to $192.3m, and profit after tax soared 34 per cent to $112.1m.
The company said it had operating cash flow of $US202.7m, up 24 per cent, and free cash flow of $US124.1, up 22 per cent. WiseTech has forecast earnings before interest, tax, depreciation and amortisation of $US396m to $US426m for the full financial year.
Mr Cartledge said WiseTech would continue to focus on the growth of its CargoWise product, which had helped the company lift revenue.
“This was driven by our global teams’ ongoing focused execution of our 3P strategy as CargoWise’s strong momentum continued with a Top 25 LGFF win in Nippon Express as well as strong growth from existing customers,” he said.
The company has raised its interim dividend by 31 per cent to pay 6.7c a share, but that was lower than expectations for a 10c per share payout.
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