Cliff jumping: A young guy in shorts jumps into seawater from the side of an old ship.

Short-seller J Capital Research wrote last week (all “$” references in the note below are “A$”):

Corona ate my homework: WTC blamed the coronavirus for a 17% downward revision to Ebitda guidance in its H1 2020 report, but behind the numbers was a shocking decline in profitability. For every lost $1 in revenue guidance, WTC lost $2 in profit. In H1 2019, WTC reported about $0.31 in Ebitda for every $1 in new revenue. This profit decline is all because of poorly performing acquisitions.

WiseTech caught the flu in July 2019: WiseTech Net Profit After Tax and Adjustments (NPATA) is down 5% HoH but down 14% when we further adjust for the $6 mln ($3 mln H1 2020) free kick to profit from an accounting change to capital leases.

Hand in the cookie jar: WiseTech’s acquisitions are not performing and so the company is paying less in earn-outs. Contingent liabilities are being removed from the balance sheet and plumping up profits as “fair value gains” over on the income statement, without a corresponding write-down of goodwill assets.

When corona isn’t enough: WiseTech could not show growth in the rate of new organic revenue growth in H1 2020, so the company just straight-out made it up and claimed a 24% acceleration when in fact new organic revenue growth declined 20%. The rate of new acquired revenue growth declined by 24%.

To read the full research note, please click here.

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