For those interested in contract manufacturers:
Notice that HADCO also announced an earnings disappointment
yesterday.
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Thursday, July 9, 1998
Geac will have to 'buy' earnings growth
By KEITH DAMSELL
Technology Reporter The Financial Post
Shares of Geac Computer Corp. Ltd. plummeted 14% yesterday on fears its profits may have
peaked.
In a conference call with analysts, executives at Markham, Ont.-based Geac warned unless it
makes
gains through acquisitions this year, earnings may be flat in 1999. That prompted a rapid selloff
in the
shares. The stock (GAC/TSE) fell $7.15 to close at $42.85 in heavy trading.
The warning confirmed the fears of some observers. Geac wins
top marks for its aggressive acquisition strategy and ability to turn
around operations of its software purchases around the world.
But some say it has failed to foster growth through investment in
research and development.
In the past three years, sales from internal operations have
grown a modest 10% to 20%, while some industry rivals have
gained 50% to 75%.
"Geac is an acquisition story," said analyst David Tyerman of
Loewen Ondaatje McCutcheon Ltd. "The company has never
had a track record of growing internally."
Despite management's conservative earnings forecast, Tyerman
and other analysts are maintaining "buy" ratings on the stock.
"Momentum players got a little panicky" and drove down shares,
said Joe Vejvoda of L‚vesque Beaubien Geoffrion Inc. Since
June, Geac has made two purchases that will add $23.5 million to
revenue next year and he expects the cash-rich company to
continue buying. Vejvoda has a 12- to 18-month target of $80 on
the stock.
The share slump followed a "sparkling performance" by Geac in fiscal 1998, chairman, president
and
chief executive William Nelson said.
For the fourth quarter ended April 30, profit was $53 million (88› a share) on revenue of $167.8
million. That figure is about $8.5 million above expectations because of several one-time factors,
including a tax refund. A year earlier, Geac had income of $20.5 million (35›) on revenue of
$135.1
million.
For the year, profit was $168.7 million ($2.82) on revenue of $646.4 million, compared with a
loss of
$71.1 million ($1.22) on revenue of $381.2 million last year.
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