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Profit report: Can the GBST Holdings Limited share price rebound? 

The GBST Holdings Limited (ASX: GBT) share price lifted slightly in trade today after the group reported its results for the six-month period ending December 31 2016. Below is a summary of the results.

  • Revenue of $45.4 million, down 20% on the prior corresponding period (pcp)
  • Operating EBITDA of $8 million, down 6% on the pcp
  • Adjusted net profit after tax of $6.2 million, up 42% on pcp
  • Adjusted earnings per share of 9.2 cents, up 40% on the pcp
  • Interim dividend of 3.7 cents
  • Operating EBITDA margins improved from 15% to 18% over the period
  • The group had no debt and $12.1 million in cash at period end

As can be seen from the plunging revenues this was a weaker-than-expected half from this junior financial technology business as it blamed competition and soft economic conditions in the United Kingdom for its underperformance.

The company has three main software products, which are a wealth administration platform named GBST Composer, a share trade processing software application named GBST Shares, and a post-trade back-office focused trade-processing platform for banks and brokers named GBST Syn.

GBST’s Composer platform appears to have been selling reasonably well, especially in the large UK financial services market. However, its GBST Syn product is operating in a competitive space and does not appear to have gained traction given the investments made in it.

The result of the recent sales slowdown is that second half EBITDA is expected to only be $4 million to take full year EBITDA to $12 million. As a result of the ominous forecast provided this month the shares have plunged 19% in 2017 and 30% over the past year.

The company operates in an increasingly competitive space and given the recent problems I am not a buyer of its shares despite the recent price falls.

If I were looking at financial technology stocks on the ASX I would prefer Iress Ltd (ASX: IRE) due to the stickiness of its market-leading products and recurring revenues it produces. Iress shares don’t come cheap though and investors may get them cheaper after it posts its full year results later this month.

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Motley Fool contributor Tom Richardson owns shares of IRESS Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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