Gentrack, the NZX-listed maker of software for utilities like airports, and power and water companies, swung to a $7.9 million profit for the six months to March 31, from a year-ago net loss of $5.8m.
Revenue jumped 47.7 per cent to $84.3m for the half as the firm put borderclosures and UK power market chaos mostly behind it.
Shares surged 22.9 per cent to $4.17 in early trading, consolidating Gentrack’s position as the NZX’s second-best performing stock (after Smartpay) over the past 12 months, even if it is still some way off its pre-Covid peak of $7.36.
Chief executiveCEO Gary Miles was bullish overall in an interview with the Herald, but did note a couple of pressure points. One was around a push to hire 20 per cent more staff in the face of visa restrictions he sees as still too tight, despite a degree of post-pandemic loosening of the rules.
"We don’t know why weren’t given a look at this [Three Waters] opportunity - which is in our backyard as a leader with modern technology. We think it’s a miss for the Government and taxpayers," Photo / Michael Craig
“We’re generating a lot of our IP [intellectual property] from here, and we’re looking to increase our staff by at least 20 per cent in the short term. Some of the [Big Tech] layoffs have helped us, but we’d like to see the Government let in more IT specialists,” Miles said.
“New Zealand has a great opportunity to position itself as an IT exporter, IP exporter and a tech hub - and it just takes people.”
There’s no question Gentrack will continue to add bodies. “We’ve taken on 65 people since the start of our financial year, from a base of around 600, and we’re looking to add more than that in the second half, so 130 or 140 [over the year],” Miles said.
The only question is whether it’s easier to hire in the UK or NZ.
Another pain point: Gentrack’s water business is doing well overall, with recent wins in Australia and the UK, where it has just finished migrating 200,000 Scottish Water customers from a legacy system to its cloud-based software.
“Our position is that we would expect, and like, to have a seat at the competitive table, to put our foot forward and go after this business. We’re the leader in water in Australia. We’re the leader in contested water in the UK, but we’re domiciled and listed in New Zealand. More than 50 per cent of homes and industry run on our software on the energy side. We don’t know why we weren’t given a look at this opportunity - which is in our backyard as a leader with modern technology. We think it’s a miss for the Government and taxpayers.”
In October, the Department of Internal Affairs said it had selected US-based software firm Infor - the incumbent at Auckland’s Watercare and several councils - for the Three Waters transition (now morphed into 10 regional entities), following a closed tender that also included German multinational SAP, the incumbent in Christchurch.
In June last year, Internal Affairs deputy CEO Michael Lovett told a Parliamentary select committee water reforms would require software spending “in the order of $300m to $500m”.
But at Treasury’s half-year economic and fiscal update in December, the cost was put at $659m. Miles maintains Gentrack saves customers an average 30 per cent when they shift from legacy systems to its products. Internal Affairs has been asked for comment.
Guidance increased
No dividend was declared, with the board saying it favoured a push for growth.
The company also upgraded full-year revenue guidance from $147m to $150m to $157m to $160m, with ebitda of “approximately $22m”.
The upgrade came despite the fact first-half revenue included $19.7m from Bulb and other insolvent power company clients in the UK, where Gentrack CEO Gary Miles is now based,
The Government approved Bulb’s sale to another retailer, Octopus Energy, which is now in the process of migrating its customers to its own platform - and that for the full-year, some $25m of revenue would be from insolvent customers.
Excluding insolvent UK power customers, utilities growth was 38 per cent. Despite the anticipated loss of $25m revenue loss from insolvent power companies, Gentrack raised its FY2024 revenue forecast from $150m to on a par with FY2023 (that is, $150m to $160m). The firm did not give specific earnings guidance but said its ebitda margin target was still 14 to 17 per cent.
Gentrack sees growth coming in the year ahead, in part, from new customer EnergyAustralia, which has recently incorporated Gentrack’s cloud billing solution into its Solar Home Bundle product and a Virtual Power Plant service that lets people earn money by sharing surplus solar power with others in their neighbourhood.
Veovo - Gentrack’s airport business - saw revenue increase 26.7 per cent to $10.4m in the first half as international traffic returned to near pre-Covid levels and there was strong demand for a new version of the company’s operations software.
Digital upgrades put on hold during the pandemic downturn have now been given the greenlight, Miles said.
!["We don’t know why weren’t given a look at this [Three Waters] opportunity - which is in our backyard as a leader with modern technology. We think it’s a miss for the Government and taxpayers," Photo / Michael Craig](https://www.nzherald.co.nz/resizer/v2/TEDQY3PIVJEUDBREGM7GNWSR4A.JPG?auth=b88474b32c9940b216556dc00396f2e3a244111ade337cca0d8f4d1d33a039e0&width=16&height=11&quality=70&smart=true)
