TechnologyOne Shares Fall 3% with Strong FY19 Results (ASX: TNE)

Aussie Software as a Service (SaaS) company TechnologyOne Ltd [ASX:TNE] released their FY19 full year results this morning.

Prior to today’s reports, TNE’s last ASX update was their Goldman Sachs presentation on 24 October.

In this, they outlined a FY19 forecast increase of their SaaS recurring revenue of over 40%.

As a result, TNE shares were trading up in anticipation of the FY19 results:

ASX TNE - Technology One Share Price Chart


Upon market open, TNE shares shot 27 cents higher to $8.50. But as the morning went on, the price plummeted:

Technology One Shares Drop in Price

Source: Market Index

Shares are trading at just $7.84 at time of writing, the lowest the price has been in a week.

With no concerning figures in the FY19 report, TNE shareholders could be taking profits following the company’s positive update.

TechnologyOne continues profit growth trend

Today’s update revealed the 10th consecutive year of record profit and Annual Recurring Revenue (ARR) for the company.

Profit growth (before tax) for TNE was up 208% on the prior year.

SaaS ARR met the 40%-plus forecast, reaching $102 million, which is a 44% increase.

According to TNE CEO Edward Chung, this growth ‘is all organic and includes no acquisitions. We added 88 enterprise customers this year to our global SaaS solution’.

Expenses were even down 9% to $210 million.

And while cash flow from operating activities was down 14%, TNE have managed to increase their total dividend by 8% to 11.93 cps.

Mr Chung noted:

TechnologyOne has consistently delivered strong and growing results since listing on the ASX in 1999.

Our ability to deliver these results for 20 years is due to our clear vision, strategy and our significant investment in R&D [research and development].’

Is it too late to buy TechnologyOne?

While TNE shares may be well in the red today, it’s not necessarily reflecting negative market sentiment.

Rather, it could reveal investors’ expectations of today’s update revealing strong results, causing a sharp price spike in the first few minutes of trading.

With over 400 large scale enterprise customers, TNE is now the largest single instance SaaS ERP (enterprise resource planning) offering in Australia.

TNE have maintained a strong uptrend for the past decade:

Technology One Shares Growth Trend Chart - 10 Years

Source: Market Index

And further growth is on the agenda.

Mr Chung says total ARR ‘is set to exceed $500m in FY24’.

TNE have been investing in the UK market, and that region’s results were up 64% this year.

The company have also recently invested in Artificial Intelligence and Machine Learning, ‘which we will ship in our 2020A release in the first half of 2020’.

These sectors appear packed with potential at the moment.

CSIRO have recently stated that AI could grow the Aussie economy by $315 billion.

So it seems TNE know where to look when it comes to company investment.

For more information on what we believe are some of the best AI stocks on the ASX, check out this free report.


Imogen van der Meer,
For Money Morning

Imogen is a research analyst at Fat Tail Investment Research, she holds an RG146 certification in securities and is currently completing a Masters Degree at the University of Melbourne. She has a particular interest in fintechs and the exciting innovations coming out of ASX-listed small caps.

Money Morning Australia