The Gentrack Group Ltd (ASX: GTK) share price is in focus after reporting its FY23 result.
It offers operational and billing software for utility businesses and it also has software for airports.
FY23 result
Here are some of the highlights from the full year to 30 September 2023:
- Revenue rose 34.5% to $169.9 million
- EBITDA (EBITDA explained) increased $15.1 million to $23.2 million
- Statutory net profit after tax (NPAT) improved $13.3 million to $10 million
- Cash balance increased $21.8 million to $49.2 million
- No dividend
The utilities business saw revenue growth of 36.7% to $147.9 million. Excluding insolvencies, underlying revenue rose 47% year on year.
Gentrack thinks supplier insolvencies are no longer a material threat to its customer base because many weaker players have exited and the UK regulator has “instituted a more business friendly regulatory approach.” Bulb and other UK insolvencies represented $27.6 million of FY23 revenue.
The Veovo airports business also grew strongly, with revenue rising by 21.3% to $21.9 million, thanks to recurring revenue increasing 15.8% and non-recurring revenue rising by 32.9% year on year.
Gentrack noted it has been investing heavily in research and development, all of which has been expensed this year, and it also increased its sales and marketing spending to help international expansion.
The company has continued to win new customers and transition them onto its software. This will be key for driving the Gentrack share price higher from here.
Since the start of FY23 it has opened an office in Singapore, built its European team, established a Middle Eastern regional hub in Saudi Arabia and expanded its engineering team in India.
Outlook for the Gentrack share price
The company is seeing “pent-up demand” for airports with demand for modernisation programs. Utilities are also seeing strong demand for modernisation in both energy and water markets.
Gentrack upgraded its revenue guidance for FY24 from the prior guidance to being at least in line with FY23 revenue of around $170 million despite the loss of the one-off revenue of $27.6 million from insolvent UK customers.
It narrowed its EBITDA guidance range to between $20.5 million and $25.5 million, compared to previous guidance of $19 million to $27 million.
This business is doing really well. I think it’s one of the most promising ASX small cap shares around. However, its share price has recovered a long way – I’m not sure it’s a cheap buy now following all of the interest rate rises. There are other ASX growth shares I’d rather invest in.
