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Here’s Why Gentrack Group Ltd (GTK) Is Buying Evolve Analytics

This morning, New Zealand’s Gentrack Group Ltd (ASX: GTK) announced the takeover of the UK’s Evolve Analytics and Evolve Parent Limited for the equivalent of NZ$44.2 million.

Gentrack is a software business specialising in services for energy and water utilities, as well as providing software to airports.

Evolve is a leading provider of energy data analytic software in the UK. For example, its software can identify and correct billing errors.

Evolve’s services are offered as a ‘Software as a Service’ or SaaS. Businesses with SaaS models typically allow their users to pay their bill an ongoing basis, rather than having a once-off fee for the product.

Gentrack said more than 50% of Evolve’s revenue is likely to be recurring and it has margins over 58%.

Why Did Gentrack Buy Evolve?

Gentrack said the acquisition of Evolve will strengthen its position in the UK utility market and provide complementary services to its existing business.

“The combined UK business is well positioned to provide highly innovative, value enhancing solutions to UK energy and water utilities and provides a strong base for expansion into new markets,” Gentrack’s Chairman John Clifford said.

CEO Ian Black said Evolve would extend Gentrack’s billing and settlement services and provide exposure to more of the UK’s large utility companies.

“Following the acquisition, Gentrack will have 53 utilities customers in the UK with an increased exposure to the “Big 6″ energy suppliers,” Mr Black said. “We expect the Evolve solutions to be highly valuable to our existing UK customer base, and there is an opportunity to extend this new offering to the Australian and New Zealand markets.”

Gentrack will fund the acquisition through its existing debt facilities, which will increase by NZ$47 million from the current NZ$50.5 million. Evolve is expected to earn revenue of £3.1 million and EBITDA of £1.8 million in the year to 30 April 2019 (click here to learn what EBITDA means).

With its total debt jumping higher Gentrack said it will undertake a pro-rata share issuance to reduce debt and provide flexibility for future acquisitions.

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