The Financial Markets Authority has cleared Gentrack Group's prospectus but said risks could have been made clearer after the utilities and airport software firm issued a profit downgrade some six weeks after its initial public offer.

The market watchdog said the Auckland-based company's May offer document, which was revised in June, didn't contain any untrue statements and wasn't misleading, but "could have been clearer in addressing the likelihood and potential impact of certain risks," according to the FMA's Gentrack IPO report. On Aug. 1, the company cut its annual profit forecast,, blaming a delay in signing an updated contract and a dispute with a customer.

The FMA found that the prospectus emphasised the company's "stable revenue base", however the report found 30 percent of Gentrack's income is from major projects, which may deliver lumpy revenue, and that "the balance of information could have been improved" in the offer documents to reflect the nature of the company's income. At the time of the allotment of shares "Gentrack's directors honestly held the view that the delays would be very unlikely to have any material impact on the revenue forecasts contained in the prospectus," the report found.

"With the benefit of hindsight it would be easy to assume that any matter that has materialised into an issue should have been considered to be a material risk, however we do not believe that is necessarily the case," the FMA said in its report. "We have no reason to believe the directors were unreasonable in their judgement of the risks associated with the share offer based on the information available to them at that time."

The two contract issues led Gentrack to cut its annual profit forecast to between $2.5 million and $2.8 million in the year ended Sept. 30 - as much as 32 percent below the $3.7 million forecast in its prospectus. Sales would be between $38.1 million and $38.5 million, missing the prospectus forecast by as much as 6.2 percent. In early September, the company resolved the delayed contract upgrade with an unnamed Australian-based energy utility company but didn't update its profit guidance.

Shares of Gentrack last traded at $2.08, some 13 percent lower than its $2.40 offer price, which it has traded below since the August profit warning. The stock initially surged in its NZX debut in late June, touching a high of $2.71, after an offer which saw shareholders, including chairman John Clifford and chief executive James Docking, sell $63 million of existing shares along with $36 million of new shares, raising capital to repay debt and listing costs. After the sale, existing investors held about 43.2 percent of Gentrack.

The FMA said it considered whether any conflicts of interest from directors selling into the float may have affected the board's due diligence around the offer, but found none. The report did not review Gentrack's continuous disclosure obligations, which is being considered in a review by stock market operator NZX.