UPDATE: Gentrack shares drop 12% on profit warning
(Recasts lede, updates share price and adds analyst comment from 5th paragraph)
By Paul McBeth
July 25 (BusinessDesk) - Gentrack shares dropped 12 percent after the company said it expects annual earnings will fall by as much as 13 percent due to delays in customer projects and bad debt risks in the UK.
The utilities software developer said annual earnings before interest, tax, depreciation and amortisation will probably be $27-$28 million in the 12 months ending Sept. 30, down from $31 million in the prior year. Gentrack had previously predicted annual earnings would be "marginally ahead" of the 2018 result.
"The delays relate primarily to customer resourcing and do not indicate that the projects concerned are at risk," the company said in a statement.
"We note the ongoing dependency on the timing of key contracts and project milestones and confirm that there is a strong pipeline of opportunities in our utilities and airports markets which support our long-term growth objective."
The shares fell as low as $5.06, and were recent down 73 cents at $5.22, taking it back to early June levels.
Greg Smith, head of research at Fat Prophets, said the reaction wasn't surprising and was effectively another strike in the market's eyes after a weak first-half result.
"It is a 13 percent miss at the bottom end versus previous guidance, and at 30 times FY20 earnings the stock will always be vulnerable to disappointments," Smith said.
"There may also be a concern that project/contract 'Delays' may prove euphemistic and more permanent in nature, or that risks in the UK are on the rise, with the economy there a hot topic given Brexit."
In May, Gentrack reported a 19 percent decline in first-half ebitda to $12.8 million, 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.