Gentrack slumps after downgrade

Shares in recently listed Gentrack slumped more than 20% yesterday, after the software supplier to utilities announced a surprise profit downgrade.

Gentrack was the seventh stock exchange listing so far this year and the profit downgrade so soon after listing on June 25 was a surprise to the market.

Gentrack said yesterday that while trading year-to-date has been in line with prospectus forecasts it was now likely that its financial results to September 30 would be lower.

Gentrac's after-tax profit would be $900,000 to $1.2 million lower, at $2.5 million to $2.8 million, as much as 32% below the $3.7 million forecast in its prospectus, published on May 26.

The shares initially slumped 23%, from $2.58 to $2.10, before retracing some losses to trade around $2.25 - well below the $2.40 issue price.

Craigs Investment Partners broker Greg Easton said the almost 20% decline in share price reflected investor sentiment over the downgrade, which was a ''big disappointment''.

''If the stock exchange wants listings, there has to be some integrity around forecasting,'' Mr Easton said.

Gentrack cited two issues leading to the downgrade.

The first was delay to a project where a dispute had arisen between the company and customer over payment for the extra effort required from Gentrack to complete the project, which Gentrack expects to now go to mediation.

The second issue was a delay in signing a substantial upgrade contract with an existing customer, but which is expected to be signed by the financial year end.

Gentrac's directors said in a statement yesterday they did not envisage any change to either the forecast dividend of $2.6 million, to be paid in December, nor for the outlook for full-year 2015, which remained as forecast in the prospectus.

Gentrack has 150 utility and airport customers in 20 countries, and employs 180 people in offices in Auckland, Melbourne and London, BusinessDesk reported.

Gentrack raised $36 million of new capital, selling shares at $2.40 apiece in its initial public offering, to repay debt and cover the IPO costs.

At the same time, shareholders including chairman John Clifford and executive director James Docking raised about $63 million selling shares.

• Sales in the 12 months ended September 2013 were $40 million, generating profit of $6.6 million.

simon.hartley@odt.co.nz

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