Australia's TechnologyOne sees opportunity in British local government changes
May 19 : Australia's TechnologyOne on Tuesday said it expects to continue benefitting from cost cuts at a time when a surge of populist lawmakers is set to come to power in British local governments, among the company's top clients.
TechnologyOne, which sells interactive software with embedded artificial intelligence features to councils and higher education providers, met forecasts for first-half profit and said a broad focus on efficiency would continue to attract new customers.
The Australia-listed firm has spent two decades expanding in Britain and now serves some 73 local government authorities, increasingly winning larger boroughs from legacy providers as authorities amalgamate to cut costs.
"When times are tough ... local governments ... look to ways to save money, and you save money by using our software because we automate the back office," CEO Edward Chung said in an interview, pointing to the financial pressures underpinning council consolidation and voter backlash.
Nigel Farage's populist Reform UK party won more than 1,000 local government seats in this month's elections, which Chung said was driven by the "need to be more efficient" and provide "better services to citizens".
Growth in the UK is outpacing the company's home market, with revenue rising about 50 per cent annually off a smaller base than Australia. The company expects its UK business to overtake its largest Australian market, New South Wales state, within two years.
Chung also dismissed fears that AI would replace software-as-a-service, or SaaS, companies and said TechnologyOne's risk-averse public sector clients would help shield it. The company added that its specialised software was less exposed to AI replacement than generic SaaS providers.
TechnologyOne reported a net profit of A$66.8 million for the six months to March 31, in line with a A$66.9 million consensus forecast, up 6 per cent. The company reiterated its full-year profit growth outlook of 18 per cent to 20 per cent and lifted its interim dividend to eight cents per share from six cents a year earlier.
Still, shares fell 3 per cent in afternoon trading as investors punished the high-valuation stock for the lack of positive surprises in an otherwise well-received result, according to analysts.
"The market was arguably looking for management to formally upgrade guidance again rather than simply reaffirm it," said ETFShares' Chief Operating Officer William Taylor.
