Gentrack says sales, profit won't meet prospectus forecasts
Gentrack says sales, profit won't meet forecast of prospectus two months ago
By Suze Metherell
Aug. 1 (BusinessDesk) - Gentrack Group, the airport and utility software company that raised almost $100 million last month selling new and existing shares, won't meet its prospectus forecasts for sales and profit because of a customer dispute and a delayed contract upgrade.
Profit in the 12 months ended Sept. 30 is now expected to be $2.5 million to $2.8 million - as much as 32 percent below the $3.7 million forecast in a prospectus first published on May 26. Sales would be between $38.1 to $38.5 million, missing the prospectus forecast by as much as 6.2 percent, the Auckland-based company said.
The downgrade won't prevent the company from paying dividends of $2.6 million in December and Gentrack's projections for 2015 are unchanged, the company said.
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. 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."
Gentrack raised $36 million of new capital selling shares at 2.40 apiece in its initial public offering, to repay debt and cover IPO costs. At the same time, existing shareholders including chairman John Clifford and executive director James Docking raised about $63 million selling existing shares. After the sale, existing investors held about 43.2 percent of Gentrack.
Docking was in an analyst briefing and wasn't immediately available for comment and Clifford was currently on a plane to Australia, the company said.
The shares last traded at $2.58 yesterday, giving investors who bought in the IPO a 7.5 percent gain and valuing the company at about $188 million.
Gentrack did flag delays in customer contracts in the risks section of its prospectus. A delay in a major project, after dispute between the company and its client over extra payment had result in mediation, and a hold up in signing a substantial upgrade with an existing customer was behind the drop in profit, it said. In the company's risk section of its prospectus it flags "failure to successfully implement projects" as a risk.
"Gentrack's financial performance may be adversely affected if it fails to implement projects, or experiences delays in the implementation," the prospectus says.
Clifford and executive director James Docking, who has run the Gentrack business since 1995, teamed up to buy Talgentra in 2012. 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.