FMA clears Gentrack on prospectus

NZ Herald

9 Nov, 2014 09:06 PM2 mins to read

James Docking, CEO of Gentrack, which provides computer software for industries such as airports and utility companies. Photo / Brett Phibbs

The Financial Markets Authority will not be taking any action against Gentrack over the profit downgrade the software developer released just five weeks after its sharemarket listing.

But the regulator says the Auckland-based company could have been clearer when flagging "certain risks" in its initial public offer (IPO) prospectus.

Gentrack revealed on August 1 that its profit in the 12 months to September 30 would be in the range of $2.5 million to $2.8 million, down from the $3.7 million forecast in the prospectus released prior to its June 25 float.

In a report released today, the FMA said Gentrack's offer documents were not misleading and did not contain any untrue statements.

However, the technology company could have been clearer in addressing the likelihood and potential impact of certain risks, the regulator said.

Gentrack blamed the profit downgrade on a dispute between the company and a major customer over extra payment, which had resulted in mediation, while a hold-up in signing a major upgrade with an existing client had also had an impact.

"We are of the view that Gentrack followed a thorough and appropriate due diligence process, though some aspects of that process could have been improved by better recording of the directors' assessment of the likelihood of risks," the FMA said. "The FMA will not be taking any action against Gentrack or its directors in relation to the matters considered in this report."

The FMA said its review had not covered matters relating to Gentrack's continuous disclosure or NZX listing rules.

"These matters have been reviewed by [sharemarket operator] NZX," the regulator said.

Gentrack -- which provides management software used by water and energy utilities, as well as airports -- did flag delays in customer contracts in the risks section of its prospectus.

Gentrack's IPO raised $36 million of new capital, which was to be used to cover listing costs and pay off debt, while existing shareholders, including chairman John Clifford and chief executive James Docking, sold $63 million of shares and continue to hold a 43 per cent stake in the company.