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Gentrack downgrades profit guidance again

Monday 30th September 2019

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Gentrack has downgraded its expected operating earnings yet again.

The utilities software provider now says earnings before interest, tax, depreciation and amortisation for the year ending today will be between $25-26 million.

It was only late July when Gentrack said it wouldn't achieve its previous target of ebitda slightly exceeding the $31 million it reported for its 2018 financial year, telling investors to expect a fall in ebitda to $27-28 million.

The company says the latest downgrade is "due to increased bad and doubtful debt provisions in relation to the UK utilities market which has seen further deterioration over the last quarter.

"Uncertainly in the UK utilities market increased with the regulatory imposition of price capping for retailers in January 2019, a key factor in the failure of nine retailers and continuing market restructuring."

In July, Gentrack was blaming that downgrade primarily on delays in customer projects which it said "do not indicate that the projects concerned are at risk," although it did also mention rising bad debts.

In May, Gentrack reported a 19 percent decline to $12.8 million in first-half ebitda, even as revenue increased 5 percent to $54.4 million. At the time, the company said revenue growth was slowing as it generated more software-as-a-service sales, and as some customer projects were deferred.

The company reported a first-half loss of $8.7 million after writing off the carrying value of airport software developer CA Plus, which it bought in 2017.

As at March 31, Gentrack reported $32.1 million of receivables, of which $18.3 million was from trade debtors and $11.9 million from contract assets. At the time, it provided for $679,000 of impairments and $137,000 for warranty claims.

Gentrack didn't provide a bottom-line profit forecast. It has a history of missing its own forecasts – its first downgrade came just five weeks after its initial public offer in 2014.

The shares fell 25 cents, or 4.3 percent, to $5.50 in early trading and are down about 18 percent from a year ago.


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