Gentrack chairman defends downgrade

Software supplier Gentrack has defended its profit downgrade last week, which triggered a share slump, saying contractual issues arose only after its recent listing on the NZX.

There has been criticism of Gentrack downgrading its profit, from an expected $3.7 million to a range of $2.5 million to $2.8 million, so soon after listing on the NZX on June 25.

Its shares were issued in the initial public offering (IPO) at $2.40, but plunged 13% to close at $2.24 following Friday's downgrade announcement.

They were trading down 8c at $2.11 yesterday.

Gentrack said on Friday there had been a delay to a major project, and disputed payment and also delay in signing a separate upgrade contract.

Gentrack chairman John Clifford said in an update on the downgrade yesterday that he ''deeply regrets'' the downgrade so shortly after listing; the business remained ''highly profitable'' and retained a wide customer base.

''The facts and circumstances that led the board to conclude that the full year 2014 forecasts should be revised down have arisen recently, after Gentrack was listed on the NZX and ASX.''

He described both delays as being with large utility customers, of long standing, and with whom Gentrack expected to do ''significant'' further work in future.

Before Gentrack's update yesterday, The New Zealand Herald reported the Financial Markets Authority had contacted Gentrack to ''seek an explanation'' on the company's shock profit downgrade last week.

A spokesman for the regulator said: ''We are now considering the responses received from Gentrack and continuing to engage with them.

We have emphasised to Gentrack's management and its advisers the importance of keeping the market fully informed.''

He said the regulator had not received any complaints on the Gentrack issue.

Gentrack's IPO raised $36 million of new capital, which was to be used to cover listing costs and pay off debt.

Existing shareholders, including chairman Mr Clifford and chief executive James Docking, sold $63 million of shares and continue to hold a 43% stake in the company.

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