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Gentrack profit falls 49%, beating downgraded guidance

Thursday 27th November 2014

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Gentrack Group, which develops utilities and airports software, reported a 49 percent drop in full year profit, missing its initial public offer forecast, but beating the downgraded guidance it gave just five weeks after listing on the share market.

Net profit dropped to $3.4 million, or 5 cents per share, in the 12 months ended Sept. 30, from $6.9 million, or 12 cents, a year earlier, the Auckland based company said in a statement. That was ahead of the downgraded guidance for annual earnings to be between $2.5 million and $2.8 million it gave in May, though still below the $3.7 million it initially flagged in its prospectus.

Operating revenue fell 4 percent to $38.5 million, short of the prospectus forecast for sales of $40.6 million, while underlying earnings before interest, depreciation and amortisation (Ebitda) of $13 million was $1.1 million shy of the offer document's expectations. .

Gentrack chief executive James Docking said operationally 2014 was a good year for Gentrack although a couple of unforeseen project issues impacted the results. Its first water billing project in the UK had gone well and will go live early next year while its profitable UK business had grown by 40 per cent. It also successfully completed a complex enterprise implementation of its first network billing product in Australia, establishing its credentials in that market, Docking said.

In May the company warned it had to downgrade its profit forecast following a dispute with a customer over the delayed completion of a project. That came just weeks after it had raised $101.8 million from its IPO. Both the Financial Markets Authority and the NZX Regulation investigated the changed profit guidance but decided not to take any action although the FMA said the company could have been clearer when flagging certain risks.

Gentrack's board declared a final dividend of 3.6 cents per share in line with the prospectus paid out Dec.19, on top of the 32 cents per share special dividend paid in March.

Chairman John Clifford said in line with the prospectus, solid growth is expected for the 2015 financial year with an expected 16 percent revenue increase to $44.7 million and net profit of $9.3 million. Achieving this requires the company to win several new projects in the first half of next year though, he said.

The shares last traded at $2.15, below the $2.40 offer price, and the stock is rated a 'hold' by one analyst recommendation compiled by Reuters, with a price target of $2.35.


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