Reality for the ASX’s boom tech stocks with leaders WiseTech and Nearmap seeing their shares sold off after bad news was revealed to investors.
Wisetech shares closed the day down more than 27% at $21.40 after it shocked investors by revealing an earnings downgrade for the year to June.
The shares closed at the day’s low which indicated the unhappiness of investors. The $21.40 level was the lowest the shares have been in 11 months.
The market ignored a solid set of numbers in the interim report and a small rise in the interim dividend.
The company blamed the impact of the COVID-19 crisis in China and other parts of the world for crimping global trade.
The 21% slump in the value of the shares wiped more than $2 billion from the value of the company.
WiseTech, which provides software services for the global logistics industry, said the predicted early 2020 recovery from the US-China trade war was emerging in January when the virus hit (around the time of the start of the Lunar New Year break on January 25).
“The unexpected outbreak of coronavirus and the effective shutdown of China, a critical driver of the global manufacturing supply chain and a 16 percent contributor to global GDP, is creating negative flow-on effects to manufacturing, slowing supply chains and economic trade across the world,” Wisetech founder Richard White told a conference call for its half-year results.
He said while the speed of recovery from the virus “will likely create a significant rebound in volumes” the delay may cause some transactional volumes to move into the next reporting period.
The interim results were solid but ignored by the market which focused on the forecast for a slowing in revenue and earnings growth for the rest of the financial year. It’s growth stock and the growth is not looking as rosey as previously thought.
Revenue guidance has been cut from a range of $440 million – $460 million to between $420 million -$450 million.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) guidance is down from a range of $145 million – $153 million to $114 million – $132 million.
The company claims more than 15,000 customers across over 150 countries including 40 of the top 50 third party logistics providers and the 25 largest global freight forwarders.
In recent years, WiseTech has grown rapidly through acquisitions, having made 15 acquisitions across Europe, Asia, Australasia, and the US in 2018-19.
WiseTech reported revenue was up 31% to $205.9 million in the December half compared to $156.7 million in the same half of 2019.
The company said $126.5 million in first-half revenue was attributable to existing and new customers of WiseTech’s CargoWise platform, while $79.3 million was attributable to acquisitions made since 2012 that are not yet embedded in CargoWise.
CargoWise One is WiseTech’s flagship logistics software program.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 29% to 62.5 million.
Net profit after tax and amortisation (NPATA) jumped 22% to $33.5 million for the December half.
A fully franked interim dividend of 1.7 cents a share will be paid. That’s up from 1.5 cents for the December 2018 half year.
Meanwhile, shares in Nearmap were sold off yesterday – though not as violently as WiseTech’s shares were on a weaker than expected interim report.
The company revealed an $18.6 million loss for the December half-year, despite a 31% lift in revenue as investors realised the costs of its rapid expansion plans are starting to erode earnings.
The aerial mapping provider said subscription revenue rose to $46 million on the back of strong growth from Australasia and North America, but the operating costs jumped 61% due to its ramped-up investment strategy and accelerated amortisation.ca.
“Our investment into sales and marketing in North America was validated by a strong and improved performance from the North America core business,” CEO Rob Newman said in yesterday’s statement.
The results came just weeks after the company downgraded contract revenue predictions for 2020 from $116-$120 million to $102-$110 million which sent its shares tumbling as much as 30% to a low of $1.71.
They closed above that level yesterday at $1.83, down 2.8% on the day. They had been down more than 5% at one stage in trading.
