Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

TechnologyOne (ASX:TNE) shares on watch after FY20 profit growth

TechnologyOne Ltd (ASX: TNE) shares are on watch this morning after reporting profit growth in its FY20 result.

FY20 result

TechnologyOne has reported that its total revenue increased by 4% to $299 million in FY20.

However, revenue from its software as a service (SaaS) and continuing business increased by 12% to $269.8 million. Its SaaS annual recurring revenue (ARR) grew by 32% to $134.6 million. That growth was all organic with no acquisitions. It added 104 enterprise customers this year to its global SaaS ERP solution and it now has 539 large scale enterprise customers with hundreds of thousands of users.

Today, the total ARR has hit $222 million and is set to exceed $500 million in the coming years. Its ARR represents 86% of total revenue. In the UK its business is now breakeven after SaaS ARR grew 22% to $7.5 million.

TechnologyOne also boasted of continuing to dominate in the local government sector, closing 40 major deals with more than $45 million in total contract value. It has over 300 council customers.

The business reported that expenses only increased by 3% to $216.5 million. This helped reported profit before tax grow by 8% to $82.5 million whilst underlying profit before tax grew by 13% to $86.1 million. However, it did invest $68.1 million before capitalisation (up 13%). This is 22% of revenue.

TechnologyOne reported cash flow generation of $66.4 million, which was an increase of 49%. This helped increase the cash balance on the balance sheet by 19% to $125.2 million.

Reported profit grew by 8% which was impacted by a once-off increase in legal provisions due to an unexpected judgement against TechnologyOne in a civil employment case.

TechnologyOne dividend

The board of TechnologyOne decided to increase 8% to 12.88 cents per share which reflected its confidence about the future.

Management comments

TechnologyOne said: “Our Global SaaS ERP solution is transforming our customers’ business and makes life simple for them. When COVID-19 hit, out solution enabled our SaaS customers to seamlessly shift to remote working. COVID-19 has reinforced the significant value proposition of our Global SaaS ERP solution which provides mission critical systems and enables our customers’ staff to work on any device anywhere, any time, seamlessly without interruptions. This has also resonated strongly with the market driving our continuing strong results.”

Summary thoughts

TechnologyOne generated 19.6 cents of earnings per share (EPS) in FY20, so it’s priced at 46 times the earnings made in FY20. It isn’t cheap, but it could be a decent option for growth over the coming years. But there are other ASX growth shares that I prefer more like Pushpay Holdings Ltd (ASX: PPH) which is growing faster with stronger operating leverage.

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW or simply entering your email below.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

LIVE ASX Chat - Join in!

Play Video

Keep reading:

Rask Analyst’s $10,000 Hypothetical Portfolio 

Rask Australia’s expert analysts have just released 11 stock & ETF positions they’d buy right now as part of a $10,000 hypothetical portfolio. 

Completely free, this report comes with the exact ticker codes, how much the analysts would invest and a detailed over the company and why we like it. Plus a 60-min podcast! 

Simply enter your email address and we’ll send you the report.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.