Monday 4th August 2014
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Gentrack Group, which touted its "proven revenue and earnings record" in its $99 million share sale in June, is refusing to answer questions after a shock profit downgrade hammered its shares on Friday.
Shares of the June-listed company dropped as low as $2.10 on Friday, below its $2.40 offer price, after it said profit in the 12 months ended Sept. 30 was now expected to be $2.5 million to $2.8 million, below the $3.7 million forecast in its prospectus. Sales would be between $38.1 to $38.5 million, missing the prospectus forecast by as much as 6.2 percent. While the company immediately privately briefed analysts on the downgrade, it declined to make any public comment.
"We have nothing to add to or comments to make regarding the notice on Friday," said Aaron Baker, general manager in an email to BusinessDesk this morning. Chairman John Clifford and executive director James Docking were unavailable on Friday because of the briefings, Baker said.
The warning came just over a month after the company raised $36 million in new capital, to cover IPO costs and pay off debt, in its initial public offer, while existing shareholders, including chairman John Clifford and executive director James Docking, sold off $63 million worth of shares, and retained a 43 percent stake in the company. There was no public pool.
"It is disconcerting for a profit warning to happen so soon after listing," John Hawkins, chairman of the New Zealand Shareholders Association, adding that his board would discuss the situation at a meeting on Wednesday.
The company cut its forecasts because of "delayed go-live on a major project where a dispute has recently arisen between Gentrack and the customer on the payment for the extra effort required from Gentrack to complete the project, which Gentrack expects to be subject to mediation," it said in a statement on Friday. It also reflected "a delay in signing a substantial upgrade contract with an existing customer, which is still expected to be signed by the financial year end."
"Its very frustrating that this has happened and there is a research blackout still," said Matthew Goodson, managing director at Salt Funds Management, which took a small stake in Gentrack. "It's really quite unsatisfactory when a company is listed like this, it's trading and investors are really groping around in the dark."
Analysts were still getting their heads around the drivers of the business, but the company did have a strong market position, and dealing with large customers with "deep-pockets" could be difficult, and it didn't appear that this year's lost earnings would be recovered next year, he said. Gentrack hasn't named the client it was in dispute with, he said.
Gentrack said it will still pay dividends of $2.6 million in December.
Docking has run the Gentrack business since 1995. Gentrack has 150 utility and airport customers in 20 countries, and employs 180 people in offices in Auckland, Melbourne and London, according to its statement. Sales in the 12 months ended Sept. 31, 2013, were $40 million, generating a profit of $6.6 million.
Gentrack shares pared Friday's loss this morning, gaining 2.2 percent to $2.29.
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