Shares of Geac Computer Corp. Ltd. soared 21 per cent Tuesday on optimism that its latest debt payment means the software company has generated enough cash in the fourth quarter for it to repay its loan, analysts say.
The stock rose 41 cents to close at $2.41 on the Toronto Stock Exchange Tuesday, its biggest one-day gain in nine weeks. More than 3.2-million shares traded, representing more than seven times its six-month daily average volume.
On April 30 - the same day its fourth quarter ended - Toronto-based Geac said it had struck an agreement with its bankers to repay the remaining $37-million (U.S.) outstanding on a $225-million line of credit by Sept. 30. On Monday, Geac said it had made an $11-million payment against the outstanding amount.
Ralph Garcea, a technology analyst at Credit Suisse First Boston, said the big cash generation periods for Geac have always been the third and fourth quarters because that's when customers renew their maintenance and support contracts. Despite the recent year of turmoil at Geac that resulted in a restructuring that's still going on, Mr. Garcea expects the company to be cash positive when it reports year-end results on June 28.
"That's given them the confidence to say, 'Look I can pay off this debt by September,' " Mr. Garcea said.
But Joseph Vejvoda, an analyst at TD Newcrest Securities, said Geac had enough cash to repay its debt in the third quarter if it had wanted to. At that time, Geac's financial statements showed it had $73.3-million (Canadian) in cash. A company spokesman Tuesday declined to disclose Geac's latest cash position.
Mr. Garcea said the stock also climbed Tuesday in anticipation of new product rollouts next week when Geac holds its annual user conference, which is expecting 1,800 participants in Las Vegas.
In October, the company embarked on a multistage reorganization, laying off 500 of its then 4,200-member work force that helped sell its enterprise relationship management (ERP) software in 24 different sectors, including construction, manufacturing and publishing. Geac recently called for additional cuts and layoffs including another 150 jobs. But it revealed no final figures, adding they will be disclosed when Geac reports results next month.