Australia's TechnologyOne shares fall most in two decades on profit miss
Australia's TechnologyOne reported annual profit below analyst expectations on Tuesday as its shift to a software-as-a-service delivery model weighed on near-term margins, sending its shares to their worst session in more than two decades.
The enterprise software services provider's stock sank 17.2 per cent to A$29.26, marking its biggest fall since late November 2002 and trimming its year-to-date gains to 6.6 per cent. It was the biggest laggard on the benchmark stock index, which closed nearly 2 per cent lower.
Brisbane-headquartered TechnologyOne posted a 17 per cent growth in profit after tax to A$137.6 million ($89.29 million) for the fiscal year ended September 30, but missed the A$139.9 million consensus estimate from Visible Alpha.
Its shift to SaaS+, which bundles enterprise software solutions and implementation in a single fee, shaved 2.7 per cent off margins, keeping its profit-before-tax margin flat at 30 per cent.
Total revenue rose 18.4 per cent to A$610 million, while annual recurring revenue (ARR) increased nearly 18 per cent to A$554.6 million but fell short of the Visible Alpha consensus estimate of A$568.3 million.
TechnologyOne's UK operations, which had boosted earnings last year, saw profit nearly halve to A$1.5 million, even as ARR leapt 49 per cent to A$51.8 million as the company invested more in the region.
From a historical perspective and compared to peers, TechnologyOne looks incredibly overvalued, said Jessica Amir, a market strategist at trading platform moomoo, adding that's why the miss had been penalised so harshly.
Even with recurring revenue growth, the market is questioning whether those premium multiples are justified in a tougher macro and margin-compression environment, Amir said.
TechnologyOne declared a final dividend of 20 Australian cents a share, down from 22.45 cents a year earlier, and a special dividend payout of 10 cents.
($1 = 1.5411 Australian dollars)
