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Edited Transcript of GTK.NZ earnings conference call or presentation 27-Nov-19 9:30pm GMT

Full Year 2019 Gentrack Group Ltd Earnings Call

Auckland Dec 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Gentrack Group Ltd earnings conference call or presentation Wednesday, November 27, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ian Black

Gentrack Group Limited - CEO

* Timothy Mark Bluett

Gentrack Group Limited - CFO

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Conference Call Participants

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* Andrew James Bowley

Forsyth Barr Group Ltd., Research Division - Head of Research

* Blair Cooper;Accident Compensation Corporation;Portfolio Manager

* Philip Campbell

UBS Investment Bank, Research Division - Analyst

* Stephen Ridgewell

Craigs Investment Partners Limited, Research Division - Deputy Head of Institutional Research

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the investor briefing November 2019 conference call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Mr. Ian Black, Chief Executive Officer. Please go ahead.

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Ian Black, Gentrack Group Limited - CEO [2]

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Good morning, everybody. Thank you. Welcome to the call. I'm joined by Tim Bluett, the company's CFO. And I'll be presenting Gentrack's results for the year to 30 September 2019. We provided a set of accompanying slides, and I'll start those with a few words on the company.

Gentrack provides enterprise solutions for 2 industry sectors, utilities and airports. Our software enables our customers to automate their core operations and revenue management processes as they drive improvements in performance and customer service. We support 109 airports and 104 utilities, where our solutions are mission-critical, deeply embedded and highly valued.

Our vision is to be the leading specialist provider of business applications to energy and water utilities and airports globally. Our business model delivers a high level of recurring revenue and profit, and we distribute the majority of profits as dividends. Our target industry has continued to experience significant business change. Airports need to maximize the use of their resources and facilities and, at the same time, improve passenger experience as the volume of passenger traffic continues to increase. Our energy retailers operate in an increasingly competitive market and their customers have got greater choice. Their own margins are under pressure. Because of this, airports and utilities are turning to our technology to deliver better outcomes for their stakeholders and customers.

Moving to financial summary for FY '19. The revenue was $111 million -- $111.7 million and our profits are $24.8 million. Adjusted NPAT was $9.6 million. And we've announced a final dividend of $0.03 per share, which brings the total dividend for FY '19 to $0.08. It is disappointing to report that our profits from the dividend were down for the first time since the IPO, and I'll comment on some of the reasons behind this next, actually.

So if I move to talking about some of the market dynamics in the utilities key markets that we operate in, we've seen headwinds which have impacted our results in Australia and the U.K. in FY '19. Governments introduced price capping, which dramatically impacted the profits of some of the large incumbent retailers in those markets. And it is intended to protect consumers but had the effect of creating margin pressure right across the energy sector. The rollout also in key -- the smart meters in our key markets has increased the burden of systems change on our customers. And in the U.K., this was compounded by political turmoil, and that damaged investment confidence in the sector.

As a result of this, we saw 9 or 10 small energy retailers in the U.K. fail, and we've also seen market [constraint], a phenomenon we haven't seen up until this year. And as part of that, implementation projects we're involved in have been delayed. Lastly, we've also seen recently the arrival of new competitors, so we're clearly actively trying to establish our customer base.

So if I look at some of the business headlines for the business in FY '19, we have continued to grow. We've added new utilities and airports in our customer list. Pleasingly, we're able to cross-sell the Evolve assurance solution into the existing utilities.

Our group recurring revenues, that's contracted and noncontracted recurring revenues, are up 22% year-on-year to $78.2 million, which constitutes over 70% of our total revenue. All new customers were contracted on a SaaS subscription model. Our annualized committed recurring revenue climbed to $59.7 million. That's contracted recurring run rate revenue, which is based on month 12.

During the year, we -- as we disclosed at the half year, we fully wrote down the CA+ acquisition. That impacted NPAT -- and we also provisioned $600,000 of doubtful debt which related to CA+ during the year.

A key metric for the utilities business is the number of meters that are billed through our solutions in the electricity, gas and water sectors. As of the end of FY '19, this number stands at 5.3 million meters (sic) [6.3 million meters] in the U.K. market alone. That's 12% of U.K. market. And this grew 21% as our customers' businesses expanded and we completed new implementation projects late last year and early this year delivering more throughput to our systems. Globally, we actually support nearly 9 million energy and water meters being billed.

Also, in the -- in this context, we've continued to invest in products. That is our existing market-specific solutions as we move customers onto the cloud and into our cloud offerings, as well as new products which we expect to sell next year and beyond.

I'll move on and talk a little bit about revenue analysis between the 2 segments of the business. So both parts of the company had a growth year, and we've provided a breakdown of total revenue split between airports and utilities showing revenue type analysis. For utilities, there's a continued shift from nonrecurring revenue and traditional licenses towards contracted recurring revenue, demonstrating this -- the shift of packaged software delivered as a service.

The airports business grew strongly. It was up 22% on 3 new on-premise deployments. And bear in mind from these contracts, annual recurring revenue start to flow next year and sort of beyond that.

Again, just a little bit more detail on the revenue split, this time by geography. Almost 90% of group total revenue now is generated outside of New Zealand. And despite the U.K. market conditions that I was highlighting earlier, the U.K. business grew 36% with new customers and projects. The Australian revenues naturally declined. And as we highlighted at the half, FY '18 was a busy year for us in Australia. We completed several projects at the beginning of FY '18 and through FY '18, which were repeated in FY '19. And this year in FY '19, there was little government regulatory change, which typically drives work in that market.

In airports, we had very strong growth in North America. That was driven by a couple of key projects, specifically in Orlando and New York. And actually in the home market in New Zealand, we did some upgrades to customers in New Zealand, which drove a growth year for the home market. Pleasingly -- pleasing to see we've got a well-established presence now in North America.

Let me move on and just give you a bit more detail on the divisional breakdown. Firstly, profits in our utilities business dipped by $6 million. This is a result of increased payroll costs but also $1.8 million of doubtful debt provision highlighted here driven by some customers going into administration in the U.K. And as we explained there, the pressure on some of the smaller retailers has been quite intense in the last -- especially in the last few months.

In airports, our revenue grew, but EBITDA was slightly lower. That was driven mostly by $1 million of losses in CA+, of which $600,000 was doubtful debt provision.

Further detail provided around the breakdown to NPAT, but I will move on and talk a little bit more specifically with some additional disclosure about the U.K. market given that's such a focus for us. U.K. has been a very strong growth market coming into this year. And earlier I highlighted the headwinds, but the business has been expanding rapidly over the last -- expanding rapidly over the last 4 years. And we included a graph here which analyzes the number of meters that retailers bill in the U.K. consumer market.

It shows that the independent players, most of these are new entrants competing for the first time, are expected to continue to take market share from established incumbent retailers. And we are a very strong player in the independent segment. We've got 40% market share of these -- of the independents that have come into the market in the last 5 to 10 years. And with them, we see further organic growth opportunity ahead. We also have established agreements with large incumbent retailers. And whilst these are long-term growth opportunities as they expand the use of our solutions with the upside to those opportunities in the years beyond FY '20.

Just moving further, I wanted to also provide a bit of detail on the analysis we've done on IT spend in energy suppliers in the U.K., in particular. So we've estimated that approximately 40% of IT budgets in these companies are spent on billing and CIS solutions. As we cross-sell additional capabilities such as the insurance solutions, our integration services, and as we introduce new capabilities to market, we're expecting to capture an increased share of their IT spend. So that's a good cross-sell growth opportunity, which we are in track into the future.

Additionally, I thought it's also worth looking at the changing revenue mix over a slightly longer time horizon for utilities. So we've provided a view over the last 4 years as the company has grown both through acquisition and organically, looking at that revenue mix change. As a proportion of total revenue, recurring revenues have increased as services have declined. And it's really attributed to the switch between -- switched package software in the cloud and subscription revenue contracts, but markedly different from only 4 years ago. And our contracted recurring revenue in this -- in utilities [about] 51% on FY '18.

Again, just to highlight the benefits of the switch to SaaS commercial model, which drives these higher recurring revenues. We've provided a model that formulates the benefits of the subscription license model. And you can see that over 5 years, the cumulative revenue under a SaaS contract compared to a typical license contract is about 50% greater. And in year 5, we're looking at 2 to 3x the revenue in that year. And of course, longer than that -- beyond the 5 years, into 10 years, the multiplier effect plays into those numbers. We've started making the transition to this whole SaaS commercial model in the last 2 years. So some of this benefit is yet to be seen in our -- in the business.

So lastly on the utilities section, I thought we'd also share a little bit about market share that we see in the 4 markets that we operate in. We have a very strong position in New Zealand with about half the market present -- half the market share of meter points billed through our platform, but we also have a very strong established position now in the U.K. and Australia.

So in those 3 markets, we expect to see continued disruption occur in the coming years as new energy sources flow into the grid from renewables and as new generation of retail models develop. Traditional players will need to reimagine their businesses. We see growth opportunity through that disruption and we have a very strong position to play a part in, in the expansion into the remainder of that addressable market.

In Singapore, we've established a presence in Singapore. Primary purpose not only to generate revenue in that market, specifically, but also to be present as we see opportunities in the broader Asian market where deregulation is planned over the next few years. We're already seeing governments in Japan, Malaysia, Korea, et cetera, moving through a deregulation cycle. And we're closely watching for opportunities in the Asian market in the next few years, just as we use the U.K. base to watch for opportunities in the European markets as they change and deregulate.

So we have a solid customer base, over 100 utilities in this market, and we've had those customers so many years. And we see growth opportunity in that current customer base, but also in the key markets we already operate in.

I'd also just like to say a few words about Veovo. Veovo, which is the brand name for our airports business, has continued its growth trajectory with completed projects and some new customers. This year, the business reached a phase where we thought it appropriate to appoint a CEO. And we've also continued to invest in technology and new solutions for our customers within the airports business.

We signed 3 new airports. We also had some markets -- some key customers go live. Orlando, which is a very large project for us, celebrated a successful go live just recently. They process 50 million passengers. It's one of the big -- the top 10 airports in the U.S. We completed projects in Wellington and Belfast. Importantly, we've just introduced new camera technology as part of our passenger movement solutions. And we've also won landmark projects at Schiphol and Keflavik where we're monitoring the entire passenger journey from curb to gate. Between the solution set that we have here, we've got a unique competitive advantage, which we see driving the growth of airports in the future.

The addressable market for airports is large. We've -- as I said, we've now got a strong presence in America. We already had very referenceable customers in Europe and the U.K., and that base -- those 2 bases are very strong, but there's a huge potential market opportunity for us to grow long term. We've got 109 customers today, but we're well placed to expand on that. In Australia and New Zealand, we're the default solution provider into the airports in the home market. But certainly, some growth opportunities in the years ahead in the airports business, and our referenceability is very high. The solution set is well placed to compete.

Let's just move on just to highlight the dividend that we declared. We're paying a dividend of $0.03 a share at year-end. This will bring the full dividend for FY '19 to $0.08, which represents 82% of adjusted NPAT, in line with our dividend policy.

Turning to the outlook. FY '20, we expect results broadly flat on this year. The U.K. market conditions remain unpredictable, as I'm sure everybody understands. We do expect some growth in ARR from our installed customer base. That probably can be offset by a reduction in project revenue, and not forgetting that we've got key contracts established positions with some large U.K. energy utilities that we plan to grow over the long term.

Importantly, we need to continue to invest in our products. So we will continue to do that to make sure we're meeting market requirements, delivering to our customers' long-term business objectives and ensuring that we remain highly competitive.

That concludes my briefing. So with that, I'll hand back to the operator. And we've got time for questions. Yes, we've got time for questions. I'll hand back at this point. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Andy Bowley with Forsyth Barr.

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Andrew James Bowley, Forsyth Barr Group Ltd., Research Division - Head of Research [2]

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I've got a couple of questions here, the first of which is around the kind of the longer-term outlook, and you don't appear to be referencing the 15% long-term organic EBITDA growth target anymore. You did back in May in the interim presentation. I guess the question for me is, is it still relevant? And if it's not, do you have a revised target?

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Ian Black, Gentrack Group Limited - CEO [3]

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Andy, look, I think you've heard that we're guiding to results to be broadly flat in FY '20. So at this time, it's probably not appropriate to reiterate that 15% growth target.

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Andrew James Bowley, Forsyth Barr Group Ltd., Research Division - Head of Research [4]

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But I guess then from an aspirational point of view over the longer term, is it no longer part of the way that you think about the opportunity as a business?

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Ian Black, Gentrack Group Limited - CEO [5]

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It's absolutely the way we think about the opportunity as a business, and we do see margins recovering in the long term. But given the uncertainty in the year ahead, we're just not giving guidance beyond what we've said right now.

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Andrew James Bowley, Forsyth Barr Group Ltd., Research Division - Head of Research [6]

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Okay. Fair enough. And then just second question on the guidance for the year ahead, can you give us a sense, in addition to what you've just said, around the key assumptions in getting to a flat result in the next year? I'm conscious that there are a number of nonrecurring drags that fall away in the last financial years or 2, almost $2.5 million of bad debts, the $1 million of CA+ losses. You're going to see further growth in the SaaS-based customers, albeit you referenced projects revenues going backwards again. Is there anything else we should be thinking about? Or is the kind of the magnitude of the delta there to do with the project revenues going backwards?

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Ian Black, Gentrack Group Limited - CEO [7]

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Yes. The reality is it's just very early in the year to start to try to predict exactly all of those factors and how they'll play out. The uncertainty in the U.K. market is giving us that pause to consider. And so we really want to just keep the guidance broad at this stage. There was consensus in the market which was much higher than this year's result, and we thought it's important to call that down.

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Operator [8]

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We'll take our next question from Stephen Ridgewell with Craigs.

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Stephen Ridgewell, Craigs Investment Partners Limited, Research Division - Deputy Head of Institutional Research [9]

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I heard what you were saying, Ian, to the response to Andy's questions. But when you -- presumably, do you have more visibility on the first half as opposed to the full year? I mean in the first half, you're able to talk to a little bit how you're tracking with respect to recurring revenue growth and project growth.

So are you saying recurring revenue is still growing? And then I suppose, to what extent are you saying project revenue is coming off in the first half?

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Ian Black, Gentrack Group Limited - CEO [10]

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Yes. I think an important factor in this thing is that the U.K. market is still in turmoil with an election pending. We're not certain what the outcome of Brexit will be. So we're wanting to see that behind us even in the first half results so that we can give that due consideration. So at this stage, we don't really -- we don't want to give any further detail and set expectations beyond what we said.

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Stephen Ridgewell, Craigs Investment Partners Limited, Research Division - Deputy Head of Institutional Research [11]

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Within the recurring revenue component, though, so you've got a contracted ARR base of just under $60 million. And then you've got a quality recurring base for services work. I mean are you saying that services work come off? I mean, I think that's sort of like one of the -- I guess, same as Andy, we're just trying to understand to what extent you're saying it's already on and even the recurring component of this project?

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Ian Black, Gentrack Group Limited - CEO [12]

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I do understand that we're also conscious that we've had -- we've seen a few customer go into administration. They've got to work their way through. So it is a question of wait-and-see how the U.K. fares through the next few months.

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Stephen Ridgewell, Craigs Investment Partners Limited, Research Division - Deputy Head of Institutional Research [13]

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Okay. And then I guess a related question to that is, it doesn't sound like you're too confident that the challenges that the smaller retailers are seeing have been quarantined yet. I think you mentioned that, in the prepared remarks, that the challenges have been quite intense in the last couple of months. So I guess the question would -- at this early stage in the year is, do you feel that the bad debt issue has just been quarantined for your own exposure? Or do you still say risk and then you're ahead? And does the guide that you've provided bake in some doubtful debt or bad debts? And have you sort of taken or consider beyond that?

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Ian Black, Gentrack Group Limited - CEO [14]

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That's certainly in our consideration, Steve. And I think it's in the mix. This is all very short term as far as we believe. But certainly, that's all part of the mix of our considerations for how we're thinking about our business this year.

As I said before, I think we'll know more once the U.K. has exited, and then we'll see where business confidence return, and also where -- how investment confidence returns into the U.K. market.

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Stephen Ridgewell, Craigs Investment Partners Limited, Research Division - Deputy Head of Institutional Research [15]

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Okay. And then just on your comment on competition. Maybe something you can talk to is whether you've lost customers to the new entrants? Are there any particular examples where you've lost customers? And are you able to talk a little to the new entrants' approach to pricing? Are they relatively (inaudible) from price? And which part of the market are the new entrants focusing on?

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Ian Black, Gentrack Group Limited - CEO [16]

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Yes. So we have seen some new entrants in the last year or 2. They're typically local in nature and targeting the lower end of the market, as you would expect. They are going to be aggressive on price to establish a customer base and probably they haven't got referenceability to show whether they can deliver or not yet.

We're always -- we never take our position for granted. So we are very conscious of making sure we remain competitive both from a product standpoint and also from the way we deliver customer service. This is, for us, this is a long game. We've seen competition come and go in the past. Our job is to make sure we've got the right outcomes for our customers, and that's what we're focused on.

So -- but we haven't seen any significant wins or losses from those companies yet, but we're certainly vigilant. And then we'll pick up some customers along the way, but sometimes that's inevitable.

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Stephen Ridgewell, Craigs Investment Partners Limited, Research Division - Deputy Head of Institutional Research [17]

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Okay. And then just in terms of the -- maybe something you can give some clearer guidance on. Capitalized development or gross R&D spend and (inaudible) that would be helpful if you can provide some of your thoughts on that.

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Ian Black, Gentrack Group Limited - CEO [18]

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Yes. Firstly, we are carrying on investing in product. We're not providing specific guidance at this time on what FY '20's R&D spend will be. What we can say is that we will see a reduction in capitalized R&D this year, probably at levels of 50% or less of last year. But that's because we've been -- we have been finishing off some of those particular products.

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Stephen Ridgewell, Craigs Investment Partners Limited, Research Division - Deputy Head of Institutional Research [19]

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Right. I mean, I guess, directionally, without asking for anything too specific then, do you -- would you expect R&D, gross R&D to be higher or lower than the FY '19 year?

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Ian Black, Gentrack Group Limited - CEO [20]

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Apologies. Once again, we haven't made -- we have made those decisions through the year that we'll see -- do the development we need to do to make sure we've got the right products. There'll be a bit of variability as we make calls on effort on various markets in various times. And that will also depend on the markets -- the market sentiment, the market condition. So no guidance at this stage or anything.

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Operator [21]

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(Operator Instructions) We'll take our next question from Blair Cooper with ACC.

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Blair Cooper;Accident Compensation Corporation;Portfolio Manager, [22]

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Look, just reading the guidance comment and listening to the answers given to the brokers' questions on the guidance, I think I'd have to say that it is probably the most useless guidance that I've seen in recent time. It doesn't give me any confidence at all that management has any insight into how the business will perform next year. And I understand there's some uncertainty, but I also note that you keep pointing to the high degree of recurring income. And clearly, there's some ability to control costs as well.

So can I just suggest that what the market is looking for here in terms of guidance is a number of things. Firstly, are you talking -- it's simple stuff. Are you talking about guidance at the EBITDA level? Or are you talking about guidance at the NPAT level? Is revenue going to be up or down? Are the costs going to be up or down? How are margins looking? Does your guidance comments include IFRS 16 adjustments or not? And what level of bad debts are you forecasting?

Those are pretty simple things. Clearly, the market is looking for that in the guidance, and I think they need to be provided as soon as you can.

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Ian Black, Gentrack Group Limited - CEO [23]

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Yes. Blair, I do appreciate your comments. Historically, we haven't given guidance this early in the year for obvious reasons. There's a lot to play out. And this year is -- there's high degree of uncertainty in our key market. We can answer some of those questions on this call around IFRS and whether we're focused on NPAT or EBITDA. But I think more broadly, we just need to work through the outcomes of some of the uncertainty, particularly in the U.K. market, and the impact of price caps in Australia so we don't misguide the market as well.

And there are elements of what you said which we do see -- we can see, but there's also elements that we are concerned about or uncertain about. But to answer a couple of those, if you want me to, on statements about IFRS...

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Blair Cooper;Accident Compensation Corporation;Portfolio Manager, [24]

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Please answer as many as you can. I mean the market is generally comfortable with guidance ranges. We're not asking you to pick a number. But to come out and say that you're broadly in line without answering those questions is, quite frankly, of little help.

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Timothy Mark Bluett, Gentrack Group Limited - CFO [25]

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Let me -- it's Tim speaking. Let me just amplify or highlight a couple of those points then. So to your point on IFRS 16, we are not factoring that into our guidance. So we're providing a like-for-like. So we're talking about an EBITDA-related guidance and not adjusting for the IFRS 16...

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Ian Black, Gentrack Group Limited - CEO [26]

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Impact.

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Timothy Mark Bluett, Gentrack Group Limited - CFO [27]

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Rental impacts, which you'll note in the accounts, we identified as approximately $3.5 million impact if we looked at FY '19. So we're looking at apples-for-apples in terms of EBITDA.

And it is EBITDA we talk about. That is what the market generally considers in terms of the guidance and how they view our performance and outlook. And we have not factored in significant bad debt to the level we experienced this year. So I hope that helps.

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Ian Black, Gentrack Group Limited - CEO [28]

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I was going to say that we couldn't say that the -- where we incurred those bad debt provisions in the U.K. market and a bit in the CA+. It's our expectation that's mostly behind us and that we've seen the worst of that. But we're still -- there's still a bit to play out in that U.K. market over the next few months. And I think it would be better for us to put that behind us and then give the markets a much clearer indications of how all of these interact and play out into our full year numbers. I think that would be the appropriate thing to do.

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Blair Cooper;Accident Compensation Corporation;Portfolio Manager, [29]

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Okay. Well, I'm sure the market will appreciate that insight when it becomes available.

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Operator [30]

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(Operator Instructions) We'll take our next question from Phil Campbell with UBS.

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Philip Campbell, UBS Investment Bank, Research Division - Analyst [31]

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Yes. Just a couple of follow-ups. I know it's difficult to predict, but obviously we've had these price caps in the U.K. market and then obviously now more recently coming into the Australian market. Do you have any kind of sense when talking to the customers and talking to industry participants, kind of when you think you'll see kind of the restructuring and a bit of a shake-out occurring? I imagine U.K. is probably at some point next year. But kind of from what I'm hearing from industry context, the Australian market is starting to get pretty tough at the moment. Maybe doesn't get as bad as the U.K., but we could start seeing that get worse. So I suppose just kind of understand your views in terms of when you think that kind of industry restructuring might play out.

And then the second question is I can't actually remember the page number of the presentation, but you've got a slide in there on the U.K. market, billing and customer management. And there's a couple of dotted lines in terms of the meter points. And obviously there's a red one, which is obviously an incumbent meter point. I'm just wondering in terms of those dotted lines, is that kind of contracted expectation? Or are they just kind of forecasts from Gentrack?

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Ian Black, Gentrack Group Limited - CEO [32]

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On the latter one, they're forecast from us. They're contracts, but they are variable contracts based on consumption.

To your restructure question, I think we have seen a lot of change in the U.K. market just in the last few months with E.ON acquiring npower, with SSE being bought by Ovo with -- and with potentially more change around ownership of the -- what we call the Big 6 incumbent suppliers.

Not only that, we have seen Shell buy off companies as it acquires -- E.ON has just bought [Tojo]. So there is definitely a lot of restructuring occurring in the ownership and the investment side of the energy retail market in the U.K. We haven't seen that level of change in Australia, but we do -- I do concur that there is increasing pressure in the Australian market as a result of price capping. Well, price capping was targeting the profits at the large incumbent players, but it has actually flowed into price pressure right across the market. And I guess it's just been amplified by the political uncertainty.

So I think the -- so my view, if you're asking for views, the view is based on the -- based on what everybody believes in the U.K. market, the changes will continue through FY '20, our FY '20, and hence, the comments about uncertainty. It's not -- we definitely do not enjoy downgrading our guidance. And I don't want to be doing that again. We want to be able to give much more confidence about our outcomes, but we're playing in these -- we're playing into these headwinds in these uncertain times, and that's an ownership of companies tends to put projects on hold and slow down some decision-making.

In the long term, we are extremely well placed to take advantage of how the markets settle out. We are highly competitive. We've got a good customer base. And we've now got SaaS offerings that will deliver higher margins in the long term as well. So am I confident about the future? Yes, I am, but we've just got an uncertain year ahead.

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Philip Campbell, UBS Investment Bank, Research Division - Analyst [33]

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Great. And could you just repeat the answer to the first question? I think I missed that just in terms of those dotted lines on that slide, whether they were contracted or forecast.

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Ian Black, Gentrack Group Limited - CEO [34]

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They're forecast. They're forecast. We have contracts with those customers, but those are forecast consumption of our capability. They're not contracted to it -- okay. They're not contracted to deploy a specific number of meters into our billing system in 2025 or something.

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Philip Campbell, UBS Investment Bank, Research Division - Analyst [35]

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Right. I suppose when you're looking at the graph, it looks like the red line, which is the incumbent meter points, that's obviously starting to get a bit more material from FY '22 onwards. Is that...

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Ian Black, Gentrack Group Limited - CEO [36]

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That's our current expectation.

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Operator [37]

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At this time, we have no further questions in the queue. I would like to turn the conference back to your speakers for any additional or closing remarks.

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Ian Black, Gentrack Group Limited - CEO [38]

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Look, just to say thank you very much for attending. And as we've said in the commentary, we will be updating the market at a point when we have better guidance to give. And whilst we're very disappointed to be announcing these results this year, we're hoping to get better news as we go through the year and put the uncertainty behind us.

Thanks very much for your attendance, and I'm sure we'll be in touch over the coming weeks to follow up.

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Operator [39]

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Ladies and gentlemen, this concludes today's conference. We appreciate your participation.