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Gentrack delivers on guidance but warns about customer caution

Thursday 29th November 2018

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Gentrack says annual net profit climbed 17 percent while its underlying operating profit rose 30 percent, consistent with its market guidance.

The provider of software to utilities reported a $13.9 million net profit for the year ended September, up from $11.8 million the previous year.

That includes a $1.4 million revenue contribution from the Evolve Analytics business acquired in June, which also contributed $900,000 to total earnings before interest, tax, depreciation and amortisation of $31 million.

The net result included $1.3 million of transaction costs for the Evolve purchase and a $4 million impairment of Evolve’s goodwill, “to reflect the fact that no further consideration is likely to be payable.”

Gentrack raised $90 million from a rights issue in July to both help finance the $44.2 million Evolve acquisition and to repay bank debt to give the company greater flexibility in making further acquisitions.

It has bought four businesses since March 2017 and the rights issue left it with $50 million of undrawn debt.

But Gentrack is already giving money back to shareholders; it will pay a final dividend of 8.7 cents per share, or $8.6 million, taking the annual payout to 13.7 cents, up 8 percent on the previous year.

Gentrack says the payout is 70 percent of its net profit before amortisation.

“Gentrack has delivered a year of revenue and profit growth across the utilities and airport segments,” chief executive Ian Black says in a statement.

Committed annualised revenue more than doubled to $51.8 million.

“We added 25 utilities and three airport customers during the year, lifting full-year subscription and software licence revenues by 78 percent on last year to $48.9 million,” Black says.

“We have maintained our leading market share of the UK’s independent energy suppliers and our software has now been selected by a number of the largest utilities in the UK including Npower, E.ON and SSE,” he says.

“We have also secured business with key airports in the USA including Orlando International Airport, and we have expanded our footprint at the Port Authority of New York and New Jersey which operates JFK, LaGuardia and Newark international airports.”

The Evolve purchase provided Gentrack with a “highly complementary” software-as-a-service-based solution in portfolio data analytics and revenue/cost assurance to Gentrack’s existing billing and customer information solutions, Black says.

Gentrack continues to target 15 percent annual organic growth in ebitda in the long-term, “but we remain exposed to contract and project timing risk and we are seeing customers adopt a cautious approach to new projects,” he says.

Government reviews and intervention in energy retail markets, the introduction of electricity price caps on default tariffs in Britain, and Brexit are all contributing to make utility customers cautious. The UK and Europe accounted for more than half the company's group revenue.

Gentrack shares last traded at $6.65, well above the $6.19 rights issue price but down from the year high at $7.52.

(BusinessDesk)

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