Gentrack Group inked the largest ever supply contract with a UK-based water retailer operating in the competitive open water market. The news sent the shares to surge up by 3.958 % to trade at $4.990 on 8 February 2019.
In the announcement to Australian Securities Exchange, Software as a Service Provider Gentrack Group Limited (ASX: GTK) declared that it has signed a new supply contract with a UK’s leading water retailer to provide customer management and billing software solutions.
The contract has been agreed on a subscription basis which will see Gentrack providing the software to its client with the aim of supporting improved customer experience and reducing the cost to serve for the retailer.
However, the name of the client and the amount has not been disclosed by the company. Gentrack just informed that it is a UK-based company that serves thousands of businesses with wastewater management and water services.
On the financial front, the company posted revenue growth of 39% to $104.5 million for the Fiscal Year ended 30 September 2018. The Net Profit After Tax (NPAT) delivered by the company stood at $13.9 million, up 17% on the previous corresponding period. The strong financial performance of the company was underpinned by the company’s organic growth and its expansion in the global airport sector with the launch of the Veovo brand.
Gentrack has added three airports and 25 new utilities customers, which helped to pull its FY18 subscription and software license revenues up by 78% on previous corresponding year. The company informed that its new utilities customers have continued to adopt its products solutions in the cloud, and over 90% of its new contracts have been signed on a SaaS basis, driving the Group’s Annualised Committed Recurring Revenue (ACRR) up by 103% year-on-year to $51.8 million.
The company had declared a final dividend of 8.7cps in Fiscal 2018 which took the full year dividend to 13.7cps, up 7.9% on previous corresponding year. This was in line to the company’s dividend policy to pay out 70-80% of NPATA representing a total payout of NZ$12.8 million and 70% of NPATA.
Looking Forward, the company eyes investment uncertainty amongst its utility customers following Government reviews and intervention in the retail energy markets in the UK and Australia. In the UK market, the introduction of electricity price caps on default tariffs in January 2019 is expected to impact the utility margins and business models of the company which will compound the Brexit uncertainty.
However, Gentrack continues to target 15% p.a. organic EBITDA growth in the long term despite its exposure to contract and project timing risk.
The Annual General Meeting of Gentrack Group Limited is scheduled to be held on 26 February 2019.
Currently, GTK is trading at a Price to Earnings ratio of 32.760 x with a market capitalization of $473.5 million. Over the past 12 months, the stock has declined by 12.07% including a negative price movement of 25.93% over the past three months.
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