While there are short-term headwinds (i.e. declining free cashflow, higher expense growth), the ongoing transition of customers to cloud, while impacting revenue growth in the short term, underpins the strong medium-to-long-term earnings growth profile for TNE.
For the first time in ten years Technology One ((TNE)) did not posted double-digit growth in earnings. FY17 net profit was up 8%, unexpectedly affected by costs. Three significant items, all negative, dragged profit lower, but this was flagged prior to the results and therefore of no surprise to brokers.
Technology One has reiterated profit growth forecasts for FY16 of 10-15%, based on a material turnaround expected in the second half. Macquarie suspects the company is well placed to win the NSW TAFE tender for a student management system.
First half results were weaker than expected. Morgans does not find the first half numbers meaningful, as there is always a timing issue of sorts. The company guided to FY16 profit growth of 10-15% and the broker is happy with the forecasts.
UBS considers the company has an attractive business model with a well-positioned model in the cloud and a small but growing international presence. The broker believes investors are willing to pay for these attributes.