Gentrack's Docking defends prospectus as FMA asks questions

Gentrack Group [NZX: GTK] chief executive James Docking says the company's prospectus was the result of thorough due diligence and expert advice, and the subsequent cut to guidance reflected the complex nature of its airport and utility software projects.

The shares last traded at $2.12, below the initial public offering price of $2.40 in June, having slumped on Aug. 1 when the company said it wouldn't meet its prospectus forecasts for 2014 sales and profit because of a payment dispute and a delay to a contract. The company said today the hold-ups, involving two large utility customers, became apparent only shortly before the Aug. 1 announcement.

"We spent a lot of money with advisers through due diligence," Docking told BusinessDesk. "The market hates uncertainty and that's the nature of it," he said of the sell off in the stock. "We do big, complex projects and they are notoriously difficult to forecast."

In the case of the delayed contract, Docking said he has "a strong belief we will get it signed soon." The payment dispute was following the terms set out in that contract, which lead to mediation, and related to clauses allowing the company to claim additional costs. As a result, revenue from the contract would be booked in the next financial year.

"It's a learning curve," he said of the way the shares were punished. "I regret we had to make the announcement" but the company had an obligation to go the market as soon as it became clear it wouldn't meet forecasts, he said.

Docking confirmed that the Financial Markets Authority has questioned the company over its disclosures, which it had expected would happen. He wasn't overly concerned about the regulator's interest.

The airport and utility software company's stock surged on their debut on the NZX on June 25 after an IPO in which shareholders including chairman John Clifford and Docking sold $63 million of existing shares along with $36 million of new capital used to repay debt and IPO costs. While the company immediately briefed analysts, executives avoided public comment until today's statement.

The company doesn't expect to have to drop its forecast dividend of $2.6 million to be paid in December or lower guidance for 2015 from its prospectus forecast.

(BusinessDesk)