Gentrack back in black after surviving UK energy sector slump

New Zealand stock exchange-listed Gentrack returned to profit and no longer saw a material threat from changes to the United Kingdom’s renewable energy subsidies that tipped over several of the software firm’s customers.

Net profit
was $10 million in the 12 months ended Sept 30, turning around a loss of $3.3m a year earlier when the utilities software developer accelerated its investment in new technology as it sought to navigate its way out of the earlier slump.

Revenue climbed 34.5 per cent to $169.9m, and earnings before interest, tax, depreciation and amortisation (Ebitda) soared to $23.2m from $8.1m in the prior period.

That helped bolster the software company’s coffers, with cash and equivalents of $49.2m at the end of the financial year, up $21.8m from the prior year.

Gentrack was knocked by changes to the UK renewable subsidy that hit just before the Covid pandemic triggered a string of failures in the UK market and led to the software firm missing out on some major customers.

“We believe that the historical occurrence of supplier insolvencies in the UK B2C (business to consumer) energy sector is no longer a material threat to our customer base as many of the weaker players have exited and the UK regulator has instituted a more business-friendly regulatory approach,” the company said in a statement.

The board decided to retain that capital with the view to tap the strong growth potential in its utilities and Veovo airports business.

Gentrack raised its revenue guidance for the September 2024 year for revenue to be roughly $170m, despite the one-off loss of $27.6m of sales from insolvent UK energy customers, and for Ebitda to be between $20.5m and $25.5m.

That was up from previous guidance for revenue to be $157m-to-$160m and Ebitda in a range of $19m and $27m.

The shares have soared 205 per cent to $5.16 over the past 12 months as the company’s turnaround plan progressed.

Milford Asset Management has been a convert, buying into Gentrack in 2021 when it crossed the 5 per cent threshold to become a substantial shareholder, buying 5.3 million shares for $10.3m, or $1.94 apiece, taking its stake to 8.8 million shares, or 8.9 per cent at the time.

It’s built that up since then, and recently touted Gentrack’s successful turnaround in a September report by analyst Michael Luke.

On Tuesday, a new shareholder notice showed it trimmed its stake to just below 13 per cent from 14.1 per cent on November 24th.