Investors Scrambled By TechnologyOne Results
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TechnologyOne shares fell more than 6% yesterday after the company reported a March 31 interim result that left investors a bit confused.
Granted that the result was released on a day when contrary to the strong finish on Wall Street and hopes of a solid day here, the ASX 200 turned down rather sharply, meaning investors were not in the mood for a report that left them asking questions.
The shares ended down 6% at $4.65.
The company reported a higher dividend of 2.86 cents a share, up 10% from 2.60 cents after reporting a static after tax result of $8.1 million, up 1% from a year earlier.
While revenue rose 6% to $120 million the Brisbane-based company reported negative operating cash flow of $10.4 million, or against a positive $2.6 million in the same half of 2016-17.
The company said it has subsequently received $17 million “in the first few weeks of April”.
The higher interim dividend will cost the company $9 million (compared with $8.15 million a year earlier) meaning it won’t be covered by after tax earnings of $8.1 million.
Not even the hint of a special dividend dividend later in the year changed the view of investors to the result.
Investors also ignored a forecast for 10% to 15% growth in net profit over the full year to the end of September, meaning the company expects to see solid growth this half.
“TechnologyOne now has 280 large scale enterprise customers, with many tens of thousands of users, making it the largest single instance ERP SaaS offering in Australia,” the company said in the release yesterday.
“Total Annual Recurring Revenue is on track to reach $173m this year, representing 55% of our Total Revenue. We are forecasting Total Annual Recurring Revenue to reach $345m in 2022, representing 70% of our Total Revenue.
“TechnologyOne Initial Licence Fee was stronger than was originally anticipated in the first half, up 7%. This was unexpected as our sales pipeline was heavily weighted to the second half of the year, but a number of deals closed earlier than expected, and this positions us well for the full year. We continued to dominate the local government and higher education markets.
“We also continued to make significant investments in the UK for future growth. We remain confident that the UK is an exciting and large market for our products and will become a significant contributor of profit growth in future years. The investment in the UK was in the expansion of our consulting business.
“TechnologyOne also continued to invest heavily in Research and Development, which was $25.6m fully expensed, up 8%. The company plans to invest $54 million dollars in R&D over the full year.”
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.