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Gentrack gains 20pc after increasing FY21 guidance as it marches unscathed through the UK energy crisis
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One of the ASX’s handful of New Zealand technology companies, Gentrack (ASX:GTK), gained over 20% this morning after upping its full year guidance.
Gentrack sells software to utilities providers (particularly energy and water providers) helping them with efficiency, Customer Relationship Management (CRM) and sustainability.
The company was established in the late 1980s amid a deregulation of New Zealand’s power market, and its clients include fellow ASX listees Mercury (ASX:MCY) and Genesis (ASX:GNE).
But a few years ago it entered the UK off the back of changes to their power market that resulted in a rush of competitors.
This move has payed off, and it showed again in this morning’s trading update.
Gentrack previously tipped full year FY21 revenue of $100.5 million and earnings of $10 million. But thanks to market conditions it now expects revenue of $105 million and earnings of $12 million.
This follows on from its performance in the first half (the 6 months to March 31 2021) in which it made $51 million in revenue and $7 million in earnings, with the latter figure up 63% from the prior corresponding period.
UK energy crisis not affecting the company
The performance comes despite turbulance in the UK energy market. In the past several weeks several suppliers have collapsed amidst the surge in wholesale gas prices.
Since 2018 the UK has imposed a price cap on energy firms which is well below current wholesale prices, and unable to be absorbed by smaller firms.
However Gentrack said the negative impacts from those changes have been minimal, owing largely to its diversification between B2C and larger B2B firms (where the price cap does not apply to the latter sector).
Although two of its customers entered the Supplier of last resort mechanism – allowing firms to be appointed the new supplier to customers of a collapsed firm and supply with no obligation to honour the old firm’s tariff – the company said the exposure to these customers was not material.
Gentrack shares rose over 20% this morning and are up 54% in the past year.
While the company disappointed investors with a $31.7 million loss in FY20, it has been regaining lost ground thanks to its performance in FY21.
