Is the Gentrack Group Ltd (ASX: GTK) share price a buy after reporting its FY19 half year result?
Gentrack provides billing and other types of software for essential service organisations such as energy businesses, water utilities and airports. It has offices in New Zealand, Australia, the UK, Singapore, USA and Europe. It provides services for over 220 utility and airport sites in more than 30 countries. One of its main customers is Sydney Airport Holdings Ltd (ASX: SYD).
Here’s What Gentrack Reported
The software’s business revenue increased by 5% to NZ$54.4 million and its recurring revenue grew by 26% to NZ$37.7 million with pleasing growth in software as a service (SaaS) revenue. On a yearly basis, March 2019 recurring revenue (excluding Evolve which was acquired in June 2018) was NZ$74 million, up 33%.
Gentrack’s UK revenue increased by 7% despite Brexit and electricity price regulation introduced at the start of this year. Australian revenue fell 27% with no large projects in the half. Rest of the world revenue increased to NZ$7.5 million with ongoing airports projects in the US and Europe.
The company added four new utilities on a SaaS basis, they were: Castle Water, Enigys, MoneyPlus and Northumbrian Energy.
Gentrack’s EBITDA fell by 19% to NZ$12.8 million (click here to learn what EBITDA means) and the net profit swung to a loss of NZ$8.7 million after an impairment of CA Plus of NZ$14.6 million. The ‘adjusted’ net profit.
The Gentrack Board has declared a dividend of 5 NZ cents per share, which was an increase 6.8% compared to a year ago.
The new dividend policy from now on will be to pay out at least 70% of underlying net profit as a dividend.
Is Gentrack A Buy?
The company is expecting FY19 EBITDA will be slightly higher than FY18, although this does somewhat depend on the timing of key contracts and project milestones.
Gentrack still aims to deliver long term compounded annual growth of EBITDA of 15%.
However, with the share price down 22% over the past year and likely to go down further today, I think Gentrack could be worth monitoring with international growth, growing recurring revenue and network effects of being able to advertise to existing clients.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.