Why the Gentrack (ASX:GTK) share price will be on watch today

The Gentrack (ASX: GTK) share price will be on watch today following an update to the company’s FY21 outlook. Here are the details.

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Gentrack Group Ltd (ASX: GTK) shares will be on watch this morning following an update regarding the company’s FY21 outlook. At market close yesterday, the Gentrack share price finished the day 1.7% lower at $1.375.

Let’s take a look and see what the software company announced.

How are things looking for Gentrack in FY21?

The Gentrack share price could be on the move today after the company reported a positive near-term future ahead.

During its annual general meeting (AGM) in November last year, the company advised that its performance for FY21 would likely be down. It said that earnings before interest, tax, depreciation and amortisation (EBITDA) for FY21 would fall well below H2 FY20, and profit could be break-even.

However, according to this morning’s release, Gentrack revealed that its FY21 revenues are expected to be in line with or slightly ahead of FY20’s revenues. The company achieved total group revenue of NZ$100.5 million for the full year’s end in 2020.

In addition, EBITDA is forecast to be roughly NZ$5 million. This is provided that research and development (R&D) costs are expensed. Gentrack noted that incremental R&D costs are projected to be around NZ$3 million per quarter from Q3 FY21 moving forward.

The company anticipates it will continue to be net cash flow positive for FY21 due to working capital management. This will build upon the NZ$16.8 million of net cash that was reported at 30 September 2020.

Profit and cash flow are predicted to be primarily based on the performance of H1 FY21. This is because the company’s incremental R&D spend is planned for the second half of 2021.

Gentrack share price snapshot

Over the last 12 months, the Gentrack share price has sunk more than 30%, reflecting difficult trading conditions. Gentrack shares took a dive last year in March, hitting a multi-year low of 77 cents. Since partially recovering, its shares have been moving sideways at around the $1.40 mark.

Based on the current Gentrack share price, the company commands a market capitalisation of around $135 million.

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