Business

Gentrack Group expects significant drop in sales and profit

Gentrack Group says it is experiencing difficult conditions in its key utilities markets, which has impacted its sales pipeline more than expected.

The utilities and airport management software company warned the market last year, and again last week, that regulatory price caps in the electricity in Britain and Australian markets and increased competition were impacting sales growth.

It expected a significant drop in total revenue for the year ending in September, with underlying profit in a range of $8 million and $12m, less than half of last year's result.

The company made an underlying profit of nearly $25m last year, which was 20 percent down on 2018.

"In light of these market conditions, Gentrack is taking action to reduce its cost base by approximately $8m on a full year basis, of which approximately $4m will benefit the current year," it said in a statement to the market this morning.

The company was in the midst of transitioning from an upfront software license model to a recurring software as a service (SaaS) model, whereby initial contract revenues were declining and being replaced by contracted recurring payments.

Total recurring revenue was expected to be flat at $78m, with a 5 percent lift in contracted recurring revenue.

More than 100 staff were working on the SaaS software development, but costs were expected to drop to about $1m from $5.1m last year.

It said Gentrack was generating cash flow and was a profitable business with a strong balance sheet and no debt.

The company said its airports business remained a market leader in Australia, New Zealand, and Britain.

Chief executive Ian Black was not available to comment on the market update.

This article was originally published on RNZ and re-published with permission.

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