Gentrack Group shares [NZX:GTK] tumbled this morning after the utilities and airport software company issued a profit downgrade just one month after listing on the NZX.
The stock initially dropped as low as $2.10, a fall of 19%, and recently traded $2.15, wiping nearly $30 million off the market value.
It is the first time the shares have fallen below the offer price of $2.40, having previously reached a high of $2.59.
Chairman John Clifford is currently on a plane to Australia and executive director James Docking is on an analyst conference call so wasn't able to comment immediately.
"These guys have been running this company for a long time, they've been a major shareholder, it shouldn't end up like this," Brian Gaynor, executive director at Milford Asset Management, told Businessdesk.
"In the business world, unexpected things do happen, but when you're doing an IPO and raising money from the public you should be in clear air so that the potential for anything negative happening is very, very small."
Gentrack confirmed this morning that its financial results to September 30 will be lower than forecast it its prospectus.
The company now believes pro forma earnings before interest, tax, depreciation and amortisation (ebitda) will be between $12.1 million and $12.5 million, a decline of 10.7%-13.6% on the previous forecast.
Net profit is expected up to $1.2 million lower at between $2.5 million to $2.8 million on revenue of $38.1 million to $38.5 million, a decline of 5.2%-6.2%.
Gentrack says the downgrade to earnings is due primarily to two issues.
First, a delayed “go-live” on a major project following a recent dispute between Gentrack and the customer on the payment.
Gentrack expects this to be subject to mediation.
And second, a delay in signing a substantial upgrade contract with an existing customer, which is still expected to be signed by the financial year-end.
Despite the lower profits, Gentrack’s board of directors do not expect any change to either the forecast dividend of $2.6m to be paid in December 2014 or the outlook for FY2015, which remains as forecast in the prospectus.
The company listed shares on the NZX on June 25 following an IPO that raised $36 million of new capital used to repay debt taken on for its management buyout in 2012 and to cover IPO costs.
At the same time, existing shareholders including chairman John Clifford and executive director James Docking raised about $63 million selling existing shares. After the sale, existing investors hold about 43.2% of Gentrack.
The Auckland-based company competes with SAP and Oracle for utility billing systems and with Lockheed Martin, SITA and AirIT for airport systems, according to its prospectus.
Customers include Genesis Energy, Meridian Energy, MightyRiverPower, Australia's Origin Energy and the UK's SembCorp Bournemouth Water among the electricity and water utility customers for its Gentrack Velocity billing product.
Airport companies that use its Airport 20/20 management system include Auckland International Airport, Sydney Airport, Hong Kong International Airport and John F Kennedy International Airport.
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