UPDATE: Gentrack shares slump 19% to below IPO price on profit warning
By Suze Metherell
Aug. 1 (BusinessDesk) - Shares of Gentrack Group plunged as much as 19 percent after the airport and utility software
company said it won't meet prospectus forecasts for sales and profit because of a customer dispute and a delayed
contract upgrade.
The share recently traded at $2.20, having dropped as low as $2.10, falling for the first time below its initial public
offer price of $2.40 in a sale that raised almost $100 million from new and existing shares in June.
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.
""These guys have been running this company for a long time, they've been a major shareholder, it shouldn't end up like
this," said Brian Gaynor, executive director at Milford Asset Management. "In the business world, unexpected things do
happen, but when you're doing and IPO and raising money from the public you should be in clear air so that the potential
for anything negative happening is very, very small."
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.
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.
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.
(BusinessDesk)