Energy One Limited (EOL.AX) Earnings Call Transcript & Summary

So good morning, everybody. Welcome to the Energy One Limited half year results presentation and discussion. My name is Shaun Ankers. I'm the CEO. I'm joined today by our Chairman, Andrew Bonwick; and Guy Steel, our CFO, and all of us will be available for questions. We will be happy to conduct a Q&A at the end, but if something occurs to you, please ask as we go along. So let's get started. So obviously, we are here to discuss the results in the half year and how it's going. But I thought I'd just take a moment to remind ourselves why we're here and what we're doing here. So the world of energy is probably the most exciting sector in the world today and the push towards net zero is obviously highly topical, and something that's on the -- in the newspapers in front of us in our daily lives. So where it's a very exciting space to be in and Energy One is, and it tends to be a leading provider in that. Well, certainly, in many ways is the most capable provider in our particular area of expertise, and it's an exciting marketplace. We've got great solutions, great people and a great opportunity. So before --I just want to clear that thought before we start on going through some highlights, obviously, we will discuss the financials in some detail, but recurring revenue is up 42% on the prior corresponding period and deep revenue -- total revenue up 41% on the prior year. Our integrations in CQ in Adelaide and EGSSIS in Belgium are progressing very well indeed, as great companies, great solutions, and that's going along well. We can talk about that. I'd like to congratulate CQ Energy and Risk Solutions International, a JV team for winning '22 Broker of the Year in weather risk. It's a great achievement in a specialized industry. In other news, we're about to go live with our battery autobidding. Obviously, you only have to have the newspaper to understand how important batteries are. And our battery autobidding solution is about to go live for a multinational customer that's signed, and we can talk about that. Recent go-live in a fully automated dispatch control system for a peaking unit. Another example of our capability that's not matched by other vendors in the space. We have a good pipeline of projects and customers, including proof-of-concept for a major utility in Europe. And of course, good market feedback and progress for our globalization program, and I will update you about how that investment is going and the progress we're making. So let's start into the financials. Obviously, increased revenue was aided undoubtedly by the acquisition of CQ and EGSSIS for the full period as expected, really. Project revenue within [indiscernible] existing business impacted by project times with a large project in Europe we're looking to get going on. And obviously, that affected it as well. So we're 19% down on project revenue, which is sort of one-off type implementation revenue. Recurring revenue was likewise aided by -- in the halfway acquisitions, but the existing business ARR was up 8%, which is obviously quite a long way off our normal run rate for ARR growth, and we will discuss that in some detail on slide 9. Profit before tax has obviously impacted the interest amortization, which is an accounting charge, noncash charge. Travel obviously came back and investments as well as employees, and we will dive into that as well. And the employee costs, obviously, not just the sort of natural salary pressures we and everyone else are experiencing in the marketing business and the project -- projects. Plural, I talk to them. Well, note that over the years ahead capitalization will fall as an overall percentage of revenue. We're still investing in the products, but obviously, services doesn't have the level of capitalization attached. And I'm sure if there's a question there, Guy can answer that in some detail. I just wanted to point out that we -- when we talked about our investment in global operations, which was $1.5 million to $2 million a year, we did mention, obviously, that's going to have an effect on the profitability. And that's sort of noticed here in this slide. So we invested about $481,000 in global ops. And of course, another change there was the amortization of acquired intangibles, which is an accounting line. So if the both on -- for comparison basis for this time last year, we took those 2 out. Statutory NPBT would be up 26%. So just to give you an idea of the effect of investing in the future and for future growth. So here's that normalization for the -- to take $875,000 for the EBITDA. There was a question about this in advanced meeting, happy to sort of discuss it again further. We did include the Global Operations costs in the guidance, but obviously, for the purposes of this pcp to normalize that bridge, and there is a bridge, we can go through it. We had one-offs attached to order activity directly related to acquisition and legal costs and other charges associated with those acquisitions. That only an acquisition costs because technically, they're a different category, but they are related to those acquisitions. And we have some legal fees attached to Europe in terms of cleaning up a few things there and establishing a European management team with various regulatory changes in country with registrations and so on that we needed to make sure we've done properly. We can come back to that slide, if you like. So what about the revenue? This is a half-to-half from this time last year. As I mentioned, project revenue has obviously the bit that affects us. The business is still, despite having 85% recurring revenue, it's still affected by project timing and project revenue. And that's the blue slide up there. You can see it's down on the time before. That's obviously has a -- is a leading indicator as well for some of that recurring revenue. And we've invested in people ahead of project wins, as I said. The overall licenses and the support lines, which are the 2 [indiscernible] recurring ones, excluding CQ services, excluding particularly CQ because it's new, they're up 19% on the prior corresponding period. And as I said, we have a proof-of-concept with a major European utility. And if that's successful, we close it by the middle of this calendar year. And of course, that would be a good account for us to win, but we're working on that one. I'd like to hand over to Guy for mainly go through the bridge slides, then obviously, there may be some technical questions there. Guy?

Thank you, Shaun, for that. Just in terms of the bridge, what we've tried to represent is, obviously, the impact of the change in business due to the acquisitions on the overall business. So as we move through the bridge, we've talked about the revenue in the existing business. The second one is the contribution of EGSSIS and CQ and EGSSIS. And the key point here is if you look at the guidance we gave when we acquired those business, this is consistent with that, and they are on track. So Shaun talked to the acquisition intangible amortization, and that is effectively -- so when businesses are required, we go through a process to identify the intangibles acquired. They're predominantly software and customer list. And in the case of CQ, we actually used an independent expert to come to those valuations due to the acquisition side, and you saw the cost of those at independent expert in the normalizations. We obviously incur costs with respect to net and the $30 million facility. So just on a $30 million facility is a $20 million amortizing component and a $10 million revolving component. The depreciation and amortization is the remainder in the existing businesses. And then as we move through the cost, you can see there the impact of increased travel on the P&L as it's been a particular focus through the half as obviously, the Board has an open ticket, our business development teams out with the customers. So they're the key points. The next bridge is an EBITDA bridge, but it really is just a replication of the previous page minus, obviously, the interest and the depreciation and amortization components and putting a completeness to say that people can understand the different levers between PBT and EBITDA Thanks, Shaun.

Thanks, Guy. So this is a recurring slide that we produces our SaaS metric slide emphasizing the changes to those SaaS metrics. There's a couple of things to call out here. The blue columns, obviously, the most recent ARR has increased 86% since FY '20, less so in the last 6 months, as you can see. And of course, that's been mentioned already. Churn slightly up. European market disruption, obviously, in Europe, it's one of the biggest energy crisis in the last 40-odd years easily. And so now everyone's made it through market exits and so on. And so that churns up slightly for that. We posted more information this time on gross margin because, obviously, it's front of mind for a lot of observers at the company. So our gross margins are in the order of 80%, which is a very typical of a SaaS, pure SaaS business, so that SaaS business line. 80% is a typical gross margin. So we're right in the zone for that one. Services and software, which is our newer business line, which is related to providing software with a service. However, you want to say it, software-and-Services that use our software and these gross margins in the order of 65% and capable of being grown, and I'll talk about that. Implementation, which is often T&M, highly specialized one-off services evolving, putting things in, right in customization and so that's a 40% gross margin. So overall, we've got a sort of a hybrid business model. It gives us a net gross margin across the business of about 60%, 63%, 62%. Net revenue retention, we get asked about this one. So we've done a bit of work to put that in. It's 105% in the most recent reporting period. And if you like, we can dig into that a bit later. Now the CAC broadly customer acquisition costs are up slightly. Obviously, we're investing in marketing and getting back out on the road down is part of that process. So I did talk about recurring revenue, the 8% on pcp across the business. And looking at the underlying rates across the business for organic because obviously, some of our recurring revenue growth has gone. A lot of it is often affected by short-term inorganic acquisitions on the line. So just trying to strip that out, make it simplified for viewers to understand is looking at the recurring revenue growth that is organically generated. So these would be in products, these products and services business lines. So the top one is Software-and-Service, and that's been growing at an average of 24% per year. Revenue growth for our traditional is the dark green is our traditional SaaS style business. That is been growing at an average of 19%. Obviously, you've got a bigger data set for that because it goes back 4 years instead of the more recent ones. And our software for niche and specialist products, which are very important products to us. They are obviously cash generative, but they are, by definition, specialist or niche. They grow at the more modest rate. So there's an overall rate affected by a number of different things. But what we're doing here, as you can see, is investing in the higher growth recurring revenue-type business lines, which is particularly Software-and-Services. This will help serve our -- to reduce our reliance on project revenue as time goes by. And whilst project revenue is important, it will become less and less important as the picture develops.

Stick it in purple.

How have been going? Well, electricity and renewables customers are forming a big part of the market segment growth. CQ Energy of all the new entrants into the Australian market in the last several years has won 35% of that [ 13 ], a very good moment given that some of those entrants have got existing solutions that they roll out and looking at in-house solutions as well. Again, for that same customer set this -- as software businesses won 30% of those accounts. Generally speaking, Europe has a success rate in the set of 50%, particularly with our physical software and physical scheduling Software-and-Services business like in France, and U.K. has won a largely European renewables customer. As I mentioned before, the timing of that has been delayed, and those revenues fall into the second half, and we're trying to get that signed off, but that's just one of those things related to large and important customers. We need to make sure that everyone's happy with the specifications and the like. Just want to mention Global 24/7 Ops, if I may. Our global business model is developing nicely. Obviously, this is what we're investing in this new business line, the globalization piece that involves services as well as software, and those 2 things supporting each other. And we are, as I said before, we're talking about a follow-the-sun model. It's been well supported by existing customers. Our European customer base has agreed to allow the Australian business to do the nightshift. And in fact, we do have 2 Belgium transferees who are now operating out of Adelaide and enjoying the weather. Compared to Belgium, the lot warmer now at the moment. It's 40 degrees there today. So they're operating the nightshift from here. And of course, we'll start doing that, rolling that out on a vice versa basis across the globe. So a very exciting development there. As I said, we have a proof-of-concept with a large, very large European customers, which we have will come to fruition within a few months. I mentioned again, battery bidding. So obviously, we only have to have new states to understand how important batteries are. The CEO of AEMO was in the newspaper yesterday talking about with it -- by 2027, the New South Wales may well have an electricity shortage because of the closure of coal-fired stations and the need to replace that generation capacity with firming type generation, which invariably means storage assets like batteries or pump hydro. So there's -- it's obviously going to feature very heavily going forward. The fact that we -- within 4 years, we might have shortages means that things do have to happen and they have to happen quite quickly in a soon period of time. So it's very important for us to have solutions for customers with battery bidding. And I'm very pleased to say we're about to go live with the multinational customer with a view to being able to do more work for them as the time goes by. It's an impressive piece of software. Obviously, batteries are operating in a very fast time frame. They're fast start, it's a lot of fast start assets, but batteries is very much in and out of the market. And so it's important to have a highly sophisticated software to help you manage that process, and we do. So there's a pipeline of interest developing around our software. Of course, as I said, out of our services, particularly is it of interest and outsourced models in general, the feedback from the customer base and from prospects is very promising towards us being able to build these kinds of framework and partnership agreements going forward. Our global outreach program has kicked off and talked about our marketing investment. And I just want to put the slide out and give you a feel for what we're doing with our widespread marketing campaign, lots of social media. I've got a really good team of marketers now that are working together on a global coordinated basis. Once we've got some awareness building, we obviously can reach out directly to them and introduce them to our other services across the group by cross-selling and a bunch of other techniques as well. But we've got a new website. It's just been launched, which I hope you're going to have a look at, which brings together all of our European brands in particular. So those brands in Europe have not been marketed separately now. It's all under the Energy One brand for Europe. And so we've got a really sophisticated website there, in my opinion that shows the breadth and depth of the company's offerings. A question from Claude. Well, if you want, you can just wait until we tend to answer that question.

Yes. I assume, Shaun. We will wait until you tend to answer that question.

Of course. That's fine. Sorry, I was just putting it in there so you can address it when you feel appropriate.

Thanks, Claude. Okay. Good. So let's look at our Software-and-Service a bit more again, why are we investing in it? You can see the growth that I already talked about that. The addressable market overall for Software-and-Services in a combined sense is going to be well in excess of USD 2 billion per annum in 2020 to '32 just based on projections for growth. It's already over $1 billion anyway. Renewables are what we need for electrification. We talk about coal-fired stations closing. Those -- predominantly these stations are closing because they're reaching the end of their useful lives. And they can't go on forever. And so inevitably, they will exit the market. And of course, we're not building any new coal stations. So that electricity power has to come from somewhere. It's going to predominantly come from renewables going forward. In the Australian market, we had a short period of time, we have 30% of the power generated by renewables. In the U.K., they had a short period with that 100% of that power generated by renewables. So these things are evolving in their own right and will continue to do so. The inevitable part of that is there's some fragmentation into smaller customers, whereas there's no doubt that bigger utilities will build renewable stations and so on. A lot of the is being undertaken by what we'd call independence. And in addition to that, there's a lot of transitioning occurring in bigger utilities who are building out their portfolios of renewables and so on and so forth. And we can -- we all know and read about that in the newspaper. Of course, distributed energy resources is a wide title that covers a lot of the , changing the way that the market works, not just on the generation side but also on the demand side. So if you like, containable lows behind the meter, if you think about large solar PV installations on factory routes and the sort of thing that can be aggregated into a fungible load that can be traded. So these things are going to happen. And it's happening right now and will continue to be so. And of course, gas remains the vital transition fuel for many, many years to come. It is essential. There's a lot of volatility in the gas market in recent times. And so being able to manage that is important for our customers. So gas remains front of mind. And we have a very good capability for helping our customers with our gas trading needs in Services-and-Software. So as I said, we want to be at the forefront of this energy revolution and providing services to the wholesale market. This just to recap slides, talk about how we pull together our business software-and-Services to provide a solution for customers. So just in summary then, I did mention the project revenues were affected by the timing of large projects. The pipeline is good, and interest is building. Last time we came out, I said that the pipeline after COVID was, in fact, growing, and we need to get people off the sidelines. Since then, the pipeline has got even stronger, but we do need to close them and people have been somewhat distracted by the energy crisis going on in -- particularly in Europe, but also here in the Aussie market in terms of prices. So there's a couple of things that have impacted that there. The pipeline is good and strong, and we -- it's up to us to go out and close some of these accounts. As again, the one-off stuff is trying to move towards a more recurring -- focus on recurring revenue as we have done for many, many years. And so margins remain strong and the opportunity to grow services margins, mainly by automation. I talked about that in our previous presentation, 0.4, running 0.4 operators per site, which means we can put on 2 or 3 new sites before we need to put on some more operations staff. But obviously, automation is great for that. We already have a good degree of automation in our services and products. But obviously, we're going to focus on building that up even more. So it's an exciting global opportunity, Energy One is ahead of the others to realize and supply these solutions. And when I say the others, I mean, the traditional competitors of ours who are, we believe, software focused, not Software-and-Services. And lastly, the Board maintains its guidance into the second half. We're aware of the fact that obviously, that means we're going to have a stronger second half than the first, but our view is that the pipeline is there. The opportunity is there. And we're working towards that, and we need to close some things and deliver some projects. And of course, we'll continue to monitor that as we go. Thank you. So that's my presentation. Would you -- should we start addressing some questions? Let me start with the floor. Back to that one on the floor.

So Claude's question regarding the one-off $500,000 spend on 24/7 service tests. As I understand, the total spend on this project is $3 million to $4 million over 2 years. Please, could you give us a sense of what these actual costs are and why the drop off after the $4 million total. So I would let Guy to talk about what we're planning to spend in the financial year, but I think we said at the beginning of the year was about 1.5, Guy, for this particular year?

Correct. It's -- yes. In 1.5 years.

So what are we spending on? Right, so that's an excellent question. So importantly, one of the projects we work on this ISO 27001, which is cybersecurity, absolutely front of line for our customers right now. We do have very good cybersecurity processes in our company. But obviously, 27001 is the global standard that people recognize and bigger customers demand for your cybersecurity. And so that's the reasonably cost-intensive exercise to get that thing in place, lots of policies and procedures, and we need to work with specialist consultants to do that. So that's one thing we're working on. We're investing more in marketing spend, and you'll see that coming through in the CAC as the months go by. But we're investing in some technology stuff to standardize our Global Operations experience. The software in each country will continue to be the software in each country because it's a very good software, class leading. Well, some of the stuff that we can standardize online. The look and feel with dashboards and that's something we're working on right now as well. We obviously have some legal costs, and things like establishing transfer pricing and global pricing solutions and standard contracts that operate in multi-jurisdictional areas. So there's some legal stuff attached to that. And of course, the implementation, the human implementation aspects of pulling all this together is a very specialized thing to do that. Why will it fall off? Why would it fall away after a couple of years? Because you can see it's more project-oriented, these costs. So once these things are in place, yes, there will be residual expense attached to them. But we're really putting in place frameworks to allow us to be able to leverage and scale up so that we can deal with many, many customers coming online in the future as opposed to dealing with them sort of on an individual basis. Does that answer the question?

Yes, Shaun. I just wanted to zoom into one little aspect of your answer, which was the marketing spend, which doesn't feel very one-off to me, generally speaking. And how much is that? And is that going to stop after 2 years? Is that just associated with letting people know that the offering exists. Like is that really one-off? Or is that ongoing?

Yes. So when I said I wasn't very precise, was I? Most of it will fall...

I just wasn't sure what you mean.

Yes. So most of it will fall away, Claude. But obviously, marketing is something that we will see as being -- that will remain. And as to how much that is, I'll stop, may ahead of time. I can't say, but obviously, we are going to -- we're ramping up our marketing spend now. And when we get to that ramp-up soonish, that will probably stay consistent over the next couple of years.

Right. So I guess -- okay. So I'm just trying to figure out, I guess, if -- I guess how one-off -- because there's $481,000 or into Global Operations initiative that we've normalized. If there's an element like -- how much of that is marketing that might continue to ramp up and even continue after in 2 or 3 years? And how much of it is like one-off stuff like the cybersecurity process?

So I think to answer the question, Claude, in the current half marketing is negligible. I think it's actually pretty much close to 0. And in the 1.5, it's an immaterial amount. It's certainly not a substantial part, maybe $100,000 to $200,000. And obviously, a fair component is the initial investment. Shaun talked about the website and also building the processes to manage search optimization in those kinds of activities. For the maturities true one-off.

And so what do we get? What are we spending it on? [indiscernible] and stuff, more trade shows, more social media, obviously, a lower cost way of doing things, but we're having -- we're putting on some more heads as another marketing person starting in this country for the Australian operation, things like that. So these aren't major, major, major sales and marketing cost there. They're an enhancement to what we're already doing.

Yes. To be clear, though, the trade shows are covered in the business units sales not Global Ops.

Yes. Yes, that's what I figured. Yes, great. So actually, while I've got your attention, is it all right if I sneak in another question?

Of course.

Perfect. So just, great to have the slide out more of those recurring revenue kind of metrics. Just because you've put it forward, I really wanted to just delve into how recurring in nature that revenue is? Because sometimes you see very different definitions of recurring revenue between different companies. Now you've given us the key metric there, which is the churn, which basically, if the churns below 5%, then that's pretty high-quality recurring revenue. But what I really wanted to explore with you is like, is there ever a scenario like have you done it all like annually, so we should always basically see recurring revenue go up. Is it fair to say we should always see recurring revenue growth half-on-half, or is there like some uneasiness to it, that means that you might see ups and downs in recurring revenue, even though it's recurring?

Well, first of all, on an aspirational basis, we'll want it to go up half-to-half. So let's just clear that one up by the way. But the -- these projects when they come online...

I was just going to say there might be like a pattern where you always get a higher recurring revenue in one half and not the other half, so that you can watch straight.

No. It's not cyclical at all. It's not symmetrical like that. So what happens is there'll be a semi -- let me explain how our recurring revenue builds up. So we've got, let's say, smaller and easy to understand product lines, business lines that we can sign customers up quite quickly, and that's sort of brands and things like that where we can sign not quite quickly, and they come online a few products to do that as well in services. Then we've got more of that more lumpy stuff that whereas customers a big implementation, then they suddenly go live. And of course, because they're larger, they have a larger license fee. And so that might kick on in one of the halves, but we can't obviously predict which half that's going to be on sort of 1 year, it will be this half and next year, it will be the other half. So they're still -- that's semi lumpy but there's an underlying steady growth of picking up new accounts at the smaller -- I don't want to say smaller, it's the term to say these days. They're generally smaller accounts, they are easier to sign. And the reason we gone down that road is because of the lumpiness or the uneven nature of products. So we tended to focus on recurring revenue that it's an annuity style, it's easier to get hold of. It's a diversification of big and small customers, large and small products and services.

Great. And as I understand it, with -- they are part of the recurring revenue is service revenue and part of it is software revenue. What do -- I think you've broken out with everyone as I think you've talked about before the different margins on that. What's the proportion? What's the over you've got it, right? So this is, I guess what I'm not quite getting. So when you say at the bottom of the line there, it has -- the gross margin is 62% in the recurring revenue. Is that recurring revenue gross margin? Or is that...

The whole Business.

Okay. Sorry. Yes. Sorry, I just didn't figure out it myself. Al right. So what -- is there some way of -- you can give us some guide to where the actual recurring revenue gross margin sits at the moment?

SaaS is at 80%. You can see that on the right side.

Yes, yes. But isn't the overall recurring revenue, a mixture of SaaS and the Software-and-Services -- services and software margins, so it's average revenue margin...

Guy, can you make an estimate of that? Or is it on the flyer?

Well, I think given that the SaaS licenses is if I were to slip the room is about 60%...

Yes. Okay. So you can put it together from that slide.

Yes.

Yes. And it's in the 4D. That's right, within the 4D lines.

Yes. Okay. So that is a deluge of results the last couple of days. So I had out to cut out myself.

No. Not yet. No. You're fine. I guess the $1.8 million is the 62% margin includes amortization when Shaun talked to the margins by effectively line of business, excluding amortization, which is based on feedback from a variety of people that we should be looking at the cash costs consistent with what the market does generally.

Yes, that's fine. Cool. Either way, now I see how I can piece that together. And so basically, the overall thing that I wanted to test there is that over time, if it all goes to plan, you use the automation, we're going to see those recurring revenue margins sneak up?

Well, that's a very good -- it's a good observation. Let me explain because I've talked about 0.4. So in line -- let's say we have 1,000 customers. We obviously can't have 400 trade or operators. That's not practical. So leaving aside the margins, automation is really important in that space to be able to focus on machines doing most of it, if you like, the legwork and then the humans supervising the machines rather than doing it manually. So it's a really important operational practice as well as providing the sort of conversation about operational leverage for margins. So definitely, automation, this business lends itself to automation, and you can automate -- even if you can't automate the entire SaaS, you can automate chunks of it. We do already have an equivalent amount of automation. CQ is highly automated. France has got automation. We're rolling out other elements of it as well. As I said in my highlights slide, we've just gone live with a full control and dispatch project, which actually doesn't just do the deal execution. It actually controls the plant as well. So switches it on and off. And of course, that's more or less what happens with batteries as well. So it's the key element to it is that control. And of course, in a market that operates in 5-minute intervals, as you can imagine, that you need to rely on machines to get that automation piece done fully.

No. So it is fair to say the overall...

It's absolutely our goal to grow those margins by using automation.

I think, Shaun, Stephen Scott has a question. He's been patiently waiting. So thanks, Stephen.

Hopefully, you can hear me okay.

Yes.

We can.

Just with the battery dispatch business, can you give us a bit more or sort of can you give us a bit more sort of details on what it does and kind of how it works and what it looks like? I know it might be a commercial confidence, but just a bit more of an understanding of that.

Yes, I can certainly have it a go. I've got on the call, Ross. Ross, actually who's an expert on this last. So Ross, chime in if I say incorrect. So obviously, a battery is a storage device. And the storage services have a limited amount of power-generating capacity over. It might be 2 hours, might be longer. But -- and certainly, it's not only 2, it's a very large amount of storage time. So that's generally short term in and out. So they're either charging or they're discharging. And so when you -- there's an optimal behavior pattern for that. You don't -- it's very simplistic of arbitrage conversation. You want to charge the battery when power prices are low and discharge when power prices are high for the maximum commercial optimization. So that whole process of determining when to come in and out is important, and there's a bunch of optimization tools that we have for that. Then, of course, it's the control the sort of bidding control aspects as well. So taking -- putting that bid into the market in the Australian context, putting the bid into the market, then the market operator sends you a signal saying come on, turn on please. And so you then obviously have to instruct the battery to turn on or instruct the battery's control system to start turning it on, which a separate piece of software that usually are supplied by the battery supplier themselves. Ross, how do I go on that one? Do you want to jump in?

Very good. Yes, that's it, Shaun. I think frequency control also. The batteries, a lot of the revenue comes from providing frequency control alongside of energy arbitrage, which I think you mentioned. So our optimization software looks at whether to dispatch for energy or to provide frequency services and works out the best way to get profit from the battery subject to the batteries constraints but Shaun's got described it very well there.

So what would they have used in the past? And what's the sort of investment case for using yours versus maybe something else?

Batteries -- especially in manually is really difficult. I guess that they are a relatively new asset to the market. Given that you can make a decision every 5 minutes around what you're doing with the battery, automation is really essential. And I think we've got a variety of differentiators. The fact that we can link our optimization software to services is one. We are responsive to the market. Our optimizer works in the context of our automation platform. So we can do anything really on intensive information technology with our optimization software. There's a whole bunch of things that I think differentiate our product from the competitors. Being built here is another.

The other things, Stephen, that differentiates us from the standard Vanilla battery software is that you can think that the battery software looks at the market price or the frequency control price and decides whether to turn on or turn off. Our software actually looks at both prices and optimizes across those. But also and more particularly, because it integrates with our automation product, it looks at your business rules and your business position because there may be some parts of the day where you don't want the battery to dispatch. You wanted to keep absorbing or whatever. So it's the interface with your business rules that makes our product really valuable.

Any more questions. I see Chris is asking a question.

Yes. There's a quick question. Talk about making the global dashboards consistent because you've got the 2 different software stacks in Europe and Australia. And I suppose it just got me thinking about how users, if they are doing operating, how are they going to manage the 2 stacks when you're in Global Operations.

Well, like having trading desks in the world earlier, you tend to have a specialized desk. So you -- a gas desk European gas desk or that kind of thing in the desk, yes. You'll have operator traders there who understand those things, the Aussie power or Aussie gas. So you're going to be focused on newer area of control, but the interchangeability of having standards suites of dashboards and behaviors, the way we represent information is important. So you can have -- there's a way to -- you can imagine if I ask you to design a dashboard that made you -- so you could monitor 1,000 assets. You would have a thought experiment as to how to -- how we're going to monitor 1,000 assets, and you want to represent that in a certain way. I'm sure you conclude the same thing everyone else includes, which is that you don't want to look at every piece of inflation, you want to make sure we've got a alerting system. If it's running fine, you want to know if it's not going fine. So there's a whole bunch of standardization there, which really improves optimization and scale. The scale is the other piece of it as well. So it's not like everyone on trade is going to be doing gas and power in 4 markets at once at once, it's more about standardizing the experience so that people can move around and we also can scale it.

There's also a question from Matthew [indiscernible].

Just curious about the energy crisis, what you guys are seeing now. And obviously, it seems to have died of. Yours got through the winter. But just what you're seeing, maybe thinking out longer term, there's a lot of talk next winter could be just as that. Some of that might be coming from fossil fuel companies that would like it to be there. But just to understood your thoughts on the ground, what are you kind of seeing? Should we be prepared for more disruption mix one in Europe from everything you know about in the industry?

Well, obviously, we just seek none of crystal ball, and it just depends on what happens. But just expressing a personal thing. Obviously, we'll wear its head again come wintertime next year. But it has sort of the worst has passed in the short term, certainly in Europe, although prices are elevated across the globe still. And of course, that creates a lot of kind of trading uncertainty and the requirements going forward. Now I talked about how people were focused on it day to day in the last 6 months. But obviously, our expectation and hope is that now they can save breath, they decide that they do need to have new and improved systems, and they're going to look to us to see some solutions and they look to us to get those things. So we would expect as a company to profit from the permanent change in that market. So we all know that Germany used to get something like 60% more recently or less than that of gas from Russia now at 0%. They don't get any of their gas from Russia. And so that has changed fundamentally, the landscape over there. And obviously, it means with the use of more LNG, there's more complexity and inherently more cost in the system than there was before. But -- so yes, to answer the question as succinctly as I can, probably next Wednesday, it will be reason to assume there would be another kind of bit of drama, but they've got several months now trying to sort of settle things down.

The other way to look at that, Matt, as well is that in 2017, when Hazer would close East Coast electricity market, and -- but it became the new normal so that when the major disruptions to supply over the last 6 to 8 months came about, it didn't really affect the way that people thought about the market because it was part of the new normal. And I suspect there will be a lot of price effects in next winter in Europe, but it will be the new normal because people would have had 6 to 12 months to think about how they deal with it and to look at the way that they've moved gas completely the other way in Europe they did for the 10 years before then.

Just we've got another question, the chat from Claude. I understand that the company has sacrificed net profit margin to fund growth in this half. But could you please talk about longer term net profit margins? For example, what kind of sustainable net profit margin ranges do you think we should expect in the next 5 years ahead? Do you think about the balance between profit margin investments and scaling?

This permanent -- it's a semi-permanent position to the P&L called the amortization, which, as you know, is a noncash item that's affected the P&L. And it's obviously for a few more years in interest, bank interest. But those things, and I'll ask Guy to comment and correct me, will be our semi-fixed items and our growth of the business will overhaul those all those within the short to medium term. And of course, interest itself will decline in time as well over the next 2 or 3 years. So those fixed items we expect to be overhauled. So to your question, Claude, the net profit margins will improve starting very soon, and we will work backwards towards a number that you -- that we would be expecting from before. We don't -- we -- none of the above, we've talked about, do we expect to have a margin erosion. In fact, the goal is to have the margin growth. So we put on, for example, more resources recently, but they obviously facilitate the growth at the normal margins. So we're not applying more cost to the revenue. We are -- it's a -- for us, margins will either maintain or grow, and we talked about the growth side. So some of the stuff below the line is what we're talking about now, and we will work back towards it, but there's no doubt, for example, that the amortization is a feature of -- for the next 10 years, which I think is the amortization period for those intangible assets. Guy, do you want to comment?

Yes, correct. I mean, I -- Claude, think in the current period, obviously, CQ was a significant acquisition and the amortization flowing from the intangibles has had a disproportionate impact compared to previous periods. All the acquisitions came with some form of amortization. So that's why it stands at current period to Shaun's point, it's locked in. The amount won't change. 7.5 years for the customer contracts to amortize. So they're there for a fair period in terms of the bank debt, we see that being paid back in full over the next 5 -- 4 to 5 years. So removing it. So we'll obviously reduce as a percentage as we pay down and then to Shaun's point, as the revenue grows or more than cover those fixed costs getting back to the margins you expect and the profit margin to expect.

Are we doing any more questions?

Not seeing any at the moment.

I've got, I've got another one since no one else is jumping in.

Sorry, just Claude, we do have a -- we'll take your questions first, but we do have a question from Stella afterwards on the chat.

Al right. Well, I look forward to Stella's question. She's about smarter than I am. I was just wondering in terms of the rate of contract wins, obviously, 30%, 50%, what can you do to improve that rate of wind? And what's the plan? I mean, obviously, that might be considered good. But the very top software companies if you really want to dominate your niche, that is a number that you probably want to try and improve. What can you do to improve that? Is that -- what's the plan there?

Well, what happens is when an asset gets built, say built in [indiscernible] talk about that through renewable assets being put into the marketplace. To a certain extent, these are also owned, as I said, by -- sometimes owned by another utility. So they may already have a license with us, and they just add that asset into that license fee, and we'll get an increment for that. So that's a feature or they may not use our software and they may have their own in-house to especially if they're large utilities, you often have fully full service. So they probably wouldn't talk to us at all. Some of the guys are too small and try and do everything on spreadsheets and don't want anything, don't want to spend any money. There's a bit of that. And then there's a little bit of competition where software perhaps is fine or there's someone who is an aggregator or a middleman who is providing some level of service, some level of middleman work on that. So that's who the competitors are that we get 1/3 of. So to your point, what can we do to improve that? I think we have the best software in the market. So it's more a matter of the commercial solution being right and us being able to get that -- get a win of the products. We have services that we provide and the solutions that we can do for you and getting a full service to those customers, we're in a transparent way so they can see that they're getting a fee for service not a black box, it's in them in the market and demonstrating the commercial proposition. It's not a technology question. I understand how he's talking about in SaaS software, but I sort of contend that this is more than that because we're not doing this. This is kind of services element to it as well for these smaller accounts. Now for bigger accounts, absolutely, what we're doing towards doing that is to become more credible on a major multinational level. This -- our globalization piece, the security of the business, the balance sheet, that cybersecurity, all of these things as the standard operating model and it -- and global contracts are absolutely prerequisites we're dealing with multinationals because they do want to see those things. I've had direct feedback from some of these multinationals say, "We are very impressed with what you're doing." This is a key element to us helping make a decision to go with you. So at that end of the market, we are doing those things to improve our ability to win accounts on an outsourced basis or on a partnership basis with mine auspicious renewables developers underlying.

And there are no competitors in that space, in that large customer space?

Well, other than the incumbent, yes. So Stella, would you like to elaborate on your U.S. expansion plans? Right, so...

That's your question.

Yes. Thank you. So it was about the U.S. and what should we do. Thanks, Stella. We've -- in the short term, we're focusing on our existing trajectory, which is Australia and Europe. We've very good offerings there, and we're building that out. Now the U.S. is obviously a massive market and is getting in there. We've said we would do that via an acquisition so that we've got the wirings delivered straightaway. And it's a big market. We would do that as the opportunity presents itself, as the capital is there, and as the management resources there as well. So I can say it's not on the immediate short-term [indiscernible], but it's definitely there. And it's something that we would -- we are willing to take an entrepreneurial approach to it if some great opportunity comes up. But I think for the next few months or year, we're sticking to our netting and working on making sure that we get the fire going on our existing opportunity. Andrew, do you want to add to that?

Yes. It's very much the amount of growth that survivable in building out the Software-and-Services and our software is going to dominate our attention for the next 12 to 18 months. Once we start showing success and revenues and cash from that, then we can again start thinking about what's available in the United States. It's very much -- we've got this opportunity. We're going to kick it out of the park.

And the any other way we can get into it is obviously being sort of getting there organically by a large customer, which we may do as well that we might end up being sort of taking up, taking there. We're going in there to help service that customer, which will be the more organic way of doing it. Okay. Hopefully, that was helpful, Stella.

We have a further question shown, which is from Stane. Can you please elaborate on the pipeline? When should we expect to see material customer wins from the Global Operations initiative? And has this strategy going to plan as it relates to new customer wins?

Well, let me start with this thing a few months ago and talked about it. I said that we would expect to see tangible returns within 12 to 24 months. I still believe that's true. I also said that within 12 months, we start to see some indicators that we're on the right track in a green shoots or symbolic wins, and they're absolutely coming through right now. And we -- as I say, we -- there's a -- in here, we talked about a couple of large opportunities framework agreements and the like. We are getting interest for renewables developers and other things to talk about they -- as they roll out. To a certain extent, this is market dependent on the rollout of renewables. Now again, in the last call yesterday about Amos talking about energy security, it's quite clear that we need to accelerate the pace of renewables development. And we, for instance, have contracts that were -- when the asset is built when we actually signed contracts right now, where the asset is built and when it works, we will pick up that work. But obviously, you have to wait for the metal to be erected first and so on. And that's sort of a rate determining step for the growth of the piece as well. But I can say right now that we are absolutely expecting to have partnership style agreements going forward. So the indicators that I talked about are very definitely there, which I'm pleased about. But as I said, 12 to 24 months is our original expectation for actually receiving tangible revenue. Hopefully, that helps, Stane. Thank you.

I think at that point, we're probably got limited time to answer any further questions. It doesn't seem to be any coming through. So Shaun, I can leave it to you to wrap the session up.

I'll just wrap up with a line. Thank you, everyone, for attending, for your valuable time and for asking some really good questions. As I say, we're the companies -- the cusp is something really important in the world today. We're making a difference both to the planet, by systems for renewables and the transition to a net zero economy. And we're also operating in the most exciting sector in the world today. And we do have leading positions and very capable growth capability happening as well. So this is a very exciting opportunity. Thank you for joining us on the journey, and we look forward to it unfolding in months ahead. Thank you very much.

Thanks all.

Thank you. This recording will be available on our website if anyone wants to revisit. Thank you. And Stane, if we could ask you to stop the recording, please?