Small Caps | 11:08 AM
The positive trend for Gentrack Group continues with FY24 results triggering higher margin forecasts from analysts.
-Gentrack Group's FY24 revenue exceeds guidance
-Falling non-recurring revenue fears prove unfounded
-Analysts increase long-term margin forecasts
-A sceptical Jarden suggests shares are priced for perfect execution
By Mark Woodruff
Since 2023, Gentrack Group's ((GTK)) share price has risen steadily from $2.44 to nearly $12 today, marked by sharp increases every May and November as half-year results consistently exceeded market expectations.
In fact, Shaw and Partners estimates management has delivered revenue over FY22 to FY24 on average 20-30% above initial guidance.
November 2024 was no exception after this week's FY24 results for Gentrack alleviated market concerns around the impact of falling non-recurring revenue (NRR) from project work on a fixed cost base, explains Wilsons.
Shares jumped by over 25% to be trading around $12.00.
Shaw now views FY25 consensus forecasts as achievable and sees FY26 earnings margins potentially reaching the upper end of management's target range, supporting a more optimistic market outlook on long-term margin potential.
Gentrack designs, develops, implements, and supports specialist software solutions for electricity, gas, and water utilities, as well as airports.
The group offers a cloud-based SaaS service with increased capabilities around complex data sets for smart meters and more diversified energy and water grids.
The utilities platform (g2) is designed to support the core billing, customer care and collections processes with Salesforce Sales Cloud integrated in the front-end.
Veovo, the aviation software platform, covers the operational management of airports including passenger forecasting, queue management and flight and gate information.
Exceeding management's guidance of around NZ$200m, Gentrack generated NZ$213.2m in revenue, beating the consensus forecast by 5% due to higher-than-expected hardware sales in the airports division, explains Wilsons.
Growing by 25% on FY23, revenue gains were broad-based across operating units, recurring/non-recurring sources and regions, comments Bell Potter.
Free cash flow (FCF) also rebounded materially in the second half, while an 11% earnings margin came in at the bottom of guidance range due to higher-than-expected long-term incentive (LTI) costs.
If an around -NZ$4m impact from higher long-term LTI-related payroll taxes is excluded, Shaw suggests earnings would have exceeded by 12% the mid-point of management guidance for between NZ$23.5-26.5m.
Due to uncertain timing around potential deals closing and timing of revenue recognition in FY25, management was only able to reiterate medium-term targets, though upside risk to the 15% revenue compound annual growth rate (CAGR) was flagged at the later conference call for analysts.
FY24 highlights, according to Jarden, were strong cash generation, new logo wins in Asia and SaudiArabia, and traction on the group's g2 stack, with the first customer going live with NZ-listed Genesis Energy running to plan.
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