The Gentrack (ASX: GTK) share price is down around 15% after providing an update about its FY19 expectations.
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).
Gentrack’s Latest Profit Guidance
A long time ago management had predicted that FY19 EBITDA (click here to learn what EBITDA means) would be “marginally ahead” of FY18’s NZ$31 million.
Then, near the end of July
Gentrack downgraded its EBITDA expectations to be within a range of between NZ$27 million to NZ$28 million.
The cause of that first earnings downgrade was delays relating primarily to customer ‘resourcing’ and assured shareholders that delays didn’t mean that the projects were at risk.
However, Gentrack also said that part of the EBITDA expectations downgrade was due to bad debt risks in the UK, which is now a large component of earnings after a string of acquisitions.
Then at the end of September, Gentrack downgraded FY19 EBITDA expectations again and said that FY19 EBITDA would be in the range of NZD$25 million and NZD$26 million.
Gentrack blamed an increase in bad and doubtful debt provisions as a consequence of a deterioration of conditions in the UK utilities space. Regulatory changes in the UK utilities market has resulted in a number of business failures and is contributing to widespread restructuring throughout the industry.
Today’s Profit Downgrade
Gentrack expects to announce its FY19 result with revenue of NZ$112 million and “EBITDA marginally below the previously advised guidance range of between $25 million to $26 million.”
Not only that, but Gentrack said that in light of the uncertainty in the UK market, the company expects FY20 to be broadly flat. Investors have not appreciated today’s news, sending the share price down around 15%.
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