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

Good morning, everybody. Good afternoon or good evening, wherever you are. Welcome to the Energy One Limited earnings call for the financial year FY '24 finishing on 30th of June. Thanks for your attendance today. It's good to have a good turnout. We've got a presentation for you, and we're happy to take questions. My name is Shaun Ankers, I'm the CEO. And we've got Guy Steel, who is the CFO, also on the call. Again, if I could ask everyone to go on mute for me, please, make life a bit easier for everyone. Thank you. Okay. So turning to the FY '24 highlights. We had good strong organic growth of revenue, up 17% and ARR for forward-looking measure, up 16% recurring revenue. Of course, the regular looking measure was up even higher, and that's to do with timing. The results were affected by the one-offs of restructure, which we talked about over the half year, and everyone knows about. We do have some information on that. I'm happy to dig into that, if you'd like one. Net debt was decreased during the year, which is a good sign by 28% helped along by our equity raise earlier on. But we have invested in the -- during the year in people and in systems, and we've got some information on that. I want to point out that all of our business line operations are profitable and going forward, increased profitability and margin growth, of course, as focus of FY '25, and we've touched on that before. We do have great offerings. We have good differentiators and a great brand position in our markets. Our diversified revenue base gives us opportunities to grow, and we've got a large and growing total addressable market TAM, which is something that we intend to exploit in the years ahead. Next slide, please. So I'll just hand over to quickly to Guy to do the next couple of 3 slides on the results, and then we can get back to the business. Thanks, Guy. Over to you.

Thanks, Shaun. I'll just quickly take people through the financials. So from a revenue perspective, revenue was up 17% overall. Recurring revenues grew slightly higher than that at 19% and ARR, which is obviously a spot number at the end of each month was up 16%. So if we break down that resolving business unit, we have Australia -- sorry just got -- I think it's got some background noise. We've got Australia, software, recurring revenue increased 9%, which is slightly down below their -- their 5-year run rate, and there is a slide later in the deck specifically on Australia. So slightly below expectations, but still performing quite, quite well. Project revenue was slightly down as a percentage, about 10%, that be $100,000 on 2023. With the Australian business. So we are seeing the pipeline's been building gradually through the year, and they're well positioned going into the 2025 year. From a CQ perspective, recurring revenue grew by 13%, which is a solid market. A lot of their business is renewable. And we have seen some -- some slowing in that market in terms of projects mobilizing, so really good result there. People will note with our project revenue overall, Europe had a really good year. CQ Advisory, which is primarily the risk brokerage revenue was down $700,000, 47% largely due to the market temporarily closing due to pricing volatility back in 2023. We are seeing strong signs of the markets returning back to normal. As I said, the pipeline for both -- for the Australian business has grown throughout the year and is in a good position. From a Europe perspective, Europe grew 27%. All businesses had a strong year. And if you look at retention, which is a key measure of what existing customers are doing, that was 108%, the Europe businesses are generally in line with that. Shaun talked to the wins in Europe, and you see a report which was published by the 4E, so I won't go into that, but if there's questions around that, then I'm going to ask Shaun through the presentation. Project revenue in Europe, as I said, was really strong, and that was across the businesses. And with Contigo, we did see a number of existing customers either upsell or move to hosted solutions. From an EBITDA perspective, it was flat on an underlying basis. And Shaun will talk later. A lot of that was due to while we grew revenue was investment in staffing. So Shaun will talk about that strategic investment later on in the presentation. From a PBT perspective, it was down $1.2 million on an underlying basis, 21%. So due to the factors in EBITDA plus debt depreciation and amortization, which is resulting from the timing of the 10-year amortization life catching up, as well as increased interest payments due to underlying rate increases as note that everyone would be aware of. From a net profit after tax perspective, a couple of things I'd call out there. We did book our R&D claims in France and the U.K. worth about $300,000. And we also booked a $600,000 item relating to our acquisition balances. So basically, the way the accounting works is if you're affecting your acquisition balances on acquisition, you book it to goodwill, but once a 12-month period has occurred, you book those entries to profit and loss. So when we revised our acquisition tax liabilities, that went through a profit loss. Not a cash impact, primarily in accounting acquisition-related adjustments, so very much a one-off. Just probably look at it from a half-on-half perspective comparing to the December half revenue, obviously, the profitability of the business has turned around considerably. We made a small loss in the first half. So revenue was up $2 million, 8%. ARR up $3.2 million, 7%. So the continued revenue growth or revenue growth continues to be strong. Expenses are actually down by $1.3 million assisted by the lack of one-offs and also restructuring benefits, leading to statutory profit before tax up by $3.3 million and $2.8 million for the half. So that's solid half after the first half, which was really about positioning the business for growth. Just in terms of cash, operating cash continue to be quite good. Higher finance costs and operating cash were offset by lower tax payments primarily due to the timing of R&D credits for [indiscernible] which we booked in 2023, banked in 2024. CapEx around the levels that we've typically done. From a balance sheet perspective, we obviously raised capital in June. And we've had a number of questions around was that net directed? No, it was not, more around keeping our borrowings in a target range compared to earnings. People will also note that we extended the NAB facility to April 2027, that recognizes NAB's continued support for the business and the relationship continues to be strong. And since we book the net debt, it's effectively halved. So people remember, we put a net debt on book to fund CQ, a $30 million facility at the time, and we're down to literally half of that. So we're also going to pay that debt down further in 2025 and look to clear completely in 2026 at current trajectory. Just in terms of the next slide, I will actually move to will be -- I've got a slide on the underlying adjustments. I don't think there's anything we need to go through there. So the next slide I will move to is the bridge, and I have talked to a number of these items already, as I said, Shaun will talk to the investment in staffing. A couple of points we would make is hosting fees obviously grow with customer volumes, although we have seen some, I guess, vendor pricing pressure, which anyone who has used cloud providers would have seen. What is from an IT expenditure perspective there's been a pretty significant investment in corporate systems. So CRM, HR, finance, finance and risk. We've obviously got merit and promotions in our existing staff. And as I talked about, we've got some pretty reasonable savings from the restructuring activity. And that's a mix of the regions CEOs exiting the business as well as the French founders. So at this point, I might move on to the metrics slide, a couple of points we would make on the metric slide of covered ARR. From an installed customer base, we grew by 37, and that when you look at underlying, that's an addition of 50 customers. Average ARR we added was around $700,000, and we lost 22 customers. ARR loss per customers, similar numbers. Across the overall customer base, the average ARR is about $150,000. From an attrition perspective, 3.5%, a little bit higher than we've seen traditionally but still very low. And obviously, with such a low attrition number, the loss of a single customer can move that fairly reasonably. I've talked to retention before, and most of the business is actually pretty consistent around that 108% retention mark. And there is a component that CPI pricing. -- low attrition rate assess that as well. And probably the last point I would make on the slide is the LTV/CAC has improved against 2022, and that's really the impact of winning more accounts, reducing the cost of acquisition per account and that flows through to the valuation. So I think at that point, I've -- I've covered off the financial slides, and I'll hand it back to Shaun, who's going to talk about the -- both the implementation of the strategy through 2024 and looking out into 2025 and beyond.

Guy, there's a question there.

Sorry.

Yes. From Chris. Can you comment on GM, please?

Yes. With the GM, we have seen it, I guess, slightly decrease. Primary reason for that is and we have to I'm sure talk about it, and you'll see it as we go through the staff resourcing slides in CQ, particularly we've put -- we've increased the staff, in trading staff. And we've also had to respond to market forces on the amount of people we pay that people. So the CQ margins definitely decreased during the year, but we believe that business -- and we also put additional compliance resourcing as well just really around trading resilience and that comes out in the margin. So we think that business is where it needs to be now and the margin will improve going forward.

Yes, Ryan's question. Ryan, I'm going to come to that, if I may on a few slides. We've got quite a few slides on salary costs. So I'll ask you to just hold fire on that one, please, and we'll get to it. Okay. So let's just -- opportunity to get back to the business for a minute and discuss strategy and just recap for you all. Our goal here is to be a one-stop shop for all our customers' wholesale needs in the energy and renewables market. But we want to build a strong, profitable and stable platform for growth, which have and to grow a comprehensive coverage for physical and contract energy needs. That's both commodity and its derivatives. Again, the one-stop shop argument comes through here. We want to service multiple customer types who are present in the market that be they retailers, generators, traders or industrials for both the main commodities in the area called power, which is also in electricity and gas and ancillary products and services like carbon and environmentals. The -- for large and small customers. So we're really looking to look after the entire wholesale suite with a variety of solutions for different needs. We offer software plus service. That's part of the strategy as well for customers who don't have that capability or intent to service 24/7 desks. Those things are symbiotic in terms of providing that service to enable the software sale as well. We set our cap of building global capability to service increasingly global landscape. So the markets are becoming less regional and becoming more global. So the assets could be anywhere nowadays as [indiscernible] market growth, but also to be a partner for multinationals and the like. especially in new territories and what do we mean by that, they're traditionally non-traditional markets where these assets are popping up like Asia and South America. We also are -- part of Australia is to invest and stay ahead of new technologies, which is AI, of course, batteries, DER, which is about the distributed energy resource side of the PPPs and the like that everyone has read about. That's part of the innovation part of the business. Want to service our customers and help them grow and manage their risk. It's a very sticky sort of customer base, and it's important to grow with our customers as they go on their journeys and provide them with the risk management and also opportunity for growth in their [indiscernible]. And that's a key part of what we do. This is not a fire or forget type of sale. It's a relationship built over a number of years, and that serves stickiness that you saw on the prior slide. We assess there's a very large TAM for this kind of activity. Of course, that's based on providing all customers, all kinds of things, which is exactly what we've set our caps at. Next slide, please go. So I just want to go through those sort of one by one and sort of talk about where we're at with each of those strategic intents. We do have, in fact, have a strong diversified revenue base. If you look at these charts here, 78% of our revenue comes from the customers who aren't in the top 10 and even the top 10 is fairly well diversified. We have a geographic concentration, showing that now 54% of our revenue comes from Europe and 46% from Australia. Go back a few years, it was 100% in Australia and nothing from Europe. So we've built that out to have a geographic representation as well as product and customer size. Next slide, please go. And this one-stop-shop approach that we put forward means we're not relying on a single type customer type or a single product or a single business line. As we can see here, the -- our revenues are spread evenly over a large customer base. I do get asked this question quite a lot in terms of who do we service and what's the breakup? As you can see here, we're not solely reliable on retailers, or the generators or renewables or traders. So we've got a good spread. I've got a question here. Do you see any competitors moving in the same direction as with you with respect to your offerings like one-stop-shop, software, follow-the-sun, are you seeing different competitors on different tenders? So there's no doubt that we're trailblazing a bit on the services. But when you go to trade shows, that's sort of language is popping up amongst the competitors as well. The one-stop shop is something I think we pioneered and a couple of other vendors are trying to sort of get into that space as well, which is, I suppose, quite flattering in terms of it means that they obviously think we're on the right track as well. So they are offering that. But I think we are ahead of the pack in terms of what we've really promoted that. A lot of the vendors in this space are sort of pure software vendors pushing 1 or 2 products. And so the idea that your one-stop shop is a fairly -- fairly unique positioning for us and certainly, the global capability is something as well. But I think, yes, there are people playing in the same space or trying to, but still a lot of single pure-play software technology kind of things, which a good, good if you just want to sell one product, but of course, you can't sell anything else to the same customers. So we've got a different road. And I think in that road, we are absolutely one of the -- the strongest competitors in the space. Next slide, please, Guy. So there was a question on staffing. Let's have a look at what we've done, right? And obviously, 28% staffing growth is much higher than we would expect. We've had a long history of disciplined growth. We are really -- we have been tooling up for the growth of the future. And we can see here on the left-hand side that most of those resources went into Europe, which we do and have said, is the bigger runway for growth. Australia is a great territory, and I've got a slide on it as well. But obviously, Europe is 10x the size, and we see a lot of growth there. So we got to make sure that we're ready to go, including senior management as well as sales resource. Ian is a good example there. In sales and marketing, the orange bar, beefing up the sales. Energy trading team will definitely think that that's the capability that we're building out for the future. So in that respect, there was a bit of catching up to do. But we feel that we're kind of rightsized then more or less now. As we've said elsewhere and on this deck, margin growth is something we definitely need to demonstrate to the market now to you all. So we feel like we're more or less rightsized and we need to just do some leveraging now and maintain cost growth as a percentage of revenue growth rather than any additional big legs in terms of building up. But we've definitely invested, and we will always continue to invest because we're capitalizing on a future opportunity, growing with the customers and with the market and with the opportunity. We all know about the tailwind called renewables, and you need to be there and ready to do it. If you play catch up then you miss the boat. So we'll always invest when we need to. Next slide, please. And let's look at where that resource base was, right? So it's localized for delivery. It's not a little concentrated in the head office or anything, that nature is spread around. But whereas, of course, that was a large increase in resource costs during the year. Our revenue per employee has consistently increased over the years. Now we need to, of course, to show you even more of that. But it has increased. We're not just loading up on overhead or anything of that nature. A lot of these are direct resources. Next slide. So let's get back to our capability in the One-Stop-Shop story. Looking at Europe, we really have an extensive European market coverage. These are balancing markets that scheduling physical energy into the market. And we have, I think, not quite unrivaled coverage, but it really would be barely 1 or 2 vendors that have got close to the same coverage for us in Europe. And as you can see that it's fairly extensive and that the orange ones are coming online this year. We talked before about our customer, a few months ago about a customer that we got. They're helping to get us into those oranges and those reds. That was what's important about the customer apart from being a good-sized customer. It helps carriers in there because we've got a vehicle to do those changes and to expand. But if you did the research, you'd find that there were barely any -- barely any vendors at this level, there's local heroes, of course, but we are the guys you come to if you want to get European coverage. In Australia, of course, we have complete coverage. The markets are sort of slightly structured, slightly differently so we can cover all markets already for all commodities and have been able to do so for a long time. but Europe, obviously, is the subject of the slide. Next slide. And that goes to the spot market. So the price slide I showed you was the balancing scheduling markets. These are what we might call energy exchanges or spot markets is really expanding now as the market opens up. Those markets have been there for a while, but liquidity has increased in those markets and a whole bunch of market changes, of course, maybe the trading across Europe much more easier to do. There's a lot of players coming in wanting to trade and we're able to offer really good coverage of those markets as well. As you can see, it's predominantly Northern Europe has been the traditional markets, but of course, Southern Europe now is opening up. So very exciting. But even now, we offer 75% of the volume traded in terms of contracts, we offer coverage of 75% of the volume traded in these markets already. Again, a significant offering. Next slide. So let's have a look at the trends going forward and why we're doing a lot of this, what's happening in the market. So this slide I've taken from the AER. It's the Australian base line, but it's fairly true for other markets. So this is what's coming into the market and what's going out, the black bars on the bottom part, that's called exiting. Traditionally, but the orange ones that come the top are all about renewables coming in there's a bit of gas in there as well, but largely renewables going up to now and going forward. That's predominantly the future and the story that we all know about that the new generation is mainly renewables. There's no mention of nuclear in here, but -- just wind, solar, batteries, that kind of thing. So the number of generators has also increased along the way. Certainly, in Australia, now up to 250-odd generators, and they are up -- they were 150 in 2018. And a lot of these are independent type of players who are coming in as project development teams or external parties who aren't the sort of traditional utility base. And so it's fragmenting somewhat we're getting medium and smaller players, hence our offerings that are more related to dealing with those guys. So bidding and scheduling in these markets is essentially physical activities. It's an intraday or day-ahead type markets, where we're doing something in the pool or balancing energy market requirements very much related to transactional stuff in the pool. This differs from contracts and derivatives trading. So that's where we separate physical from contracts trading. So physical markets are interacting with the market, transacting with the market whereas the contracts trading is something that's to the side. We supply software and services for customers, both in Australia and Europe, who need these requirements. So when we say the market is becoming more physical, what do we mean by that, it means that interacting with the market, communicating with the market is something you need to do in a day, intra-day and day ahead type of approach where we're moving the logistics of the energy around. Next slide, thanks. So we see the services plus software is this white space for growth, I'm familiar with that term, but quite a popular term in the space. So it's white space, there for people who don't necessarily have the ability to consumer software and the services going forward. It's a core business line for us. We have invested in that. Obviously, you've seen that with the acquisitions and the developments we've made and the focus we've put upon it. We feel we're well placed to capitalize on it. we can see from these diagrams that the physical contract, physical market, logistics and trading is obviously the lion's share of our revenue at the moment. 66%, that's 2/3 of our revenue comes from the physical side of the market versus the contract side. So the contract side is sort of the longest serving part of the market. Derivatives trading, very important risk management tools for our customers, but a lot of the growth is coming into that physical energy side. So that's where we are. That's where well placed to be with it. and we're offering additional services to help customers get into it. Next slide, please. So that's where we are in terms of developing our strategy, but there's a bunch of other things as well that I just want to touch upon because obviously, there are of interest. We are trying to do much better around marketing and so on. We've done a big effort on that in the past year. We've got a great team. We've 89,000 visits to our website, I think, must be a record for the company. We've picked up 290-odd leads. There's more data in my CEO report. I'd encourage you to read that. We've got a global CRM, that's really giving us much more insight now to what's going on, what we're doing well and what we're doing less well, and that's all feedback. We win about 50% of our opportunities. And as Guy's data shows, we picked up 37 new organic growth in stores during the year. So it's the one-stop shop again, that's more a differentiator against pure-play competitors. We do have evidence of that being resonating with our customer base. The statistic I use for that is the big trade show in Europe, 40% of visitors to our website -- to our stand, tick the box saying they're interested in more than one thing. So our customers do have more than one challenge, and they need more than one solution. It's not a one piece of software and arbitrate, it doesn't work like that. We're big on cybersecurity, as we all know, anyone who's followed the company. We are now live with our 24/7 SOC, which is a great development, and we continue to invest in that going forward and get ISO accreditation soon thereafter. We have done a lot of integration of global IT and improved all those back office systems. That's something that's ongoing as well. So this is really a step towards globalizing the business, building that capability globally, being the vendor of choice for larger players who are interested in developing assets around the globe. One of the tangible example of that is in the quarter ahead, we'll commence the follow-the-sun for trading desks, both to Europe and from Europe. So it's a work in progress going forward, but we'll actually sort of open up and go live on a full cut night -- night shift coverage both ways. There's no other vendors offers this type of service going forward. And this will allow us to compete for work in areas that have the capability. We do have indeed have more than one prospect, whereby this capability will allow us to actually offer them a solution, whereas go back 6 months, we would have had to say no. So we'll continue to invest in our products and services and our people to maintain our strong reputation and our solution set going forward. Next slide. So just to summarize, and then we'll happy to take some questions, and we do have some detailed slides as well. After a bit of volatility and a lot of volatility in the markets in '22 and '23 for reasons we know about [indiscernible] for customers in -- we've had a good year for organic recurring growth revenue growth. I really think that, that demonstrates to people. We had a clean set of yields here. There's no inorganic additions, they are all organic revenue growth. Guy has pointed out that we've had a return -- a strong return to profitability in the half from the first half that just shows how resilient and the good underpinnings of the business. The reduction in debt, which hopefully will give comfort to some of those who are concerned about that. The pipeline is good and the interest is building. We have a great opportunity here. And we've really positioned the business to tackle what we consider to be our view of the future of the business. Given that we've got all these things going on, the board declined to offer guidance, but of course, we'll just review that as we go through the year. Thank you very much. Questions?

So we do have a -- so we've got a question from Matt, the first question, I think this is the first. Your second half profitability representative of run rate profitability. In other words, can we double the half 2 profitability? Well, I think to Shaun's point, we're not offering guidance. But if you look at the performance of the company, I think the mathematics are pretty simple, and it's a pretty reasonable proxy of the business moving forward. So form any conclusions from there. The second point is -- the next question is from Claude. Good, Claude, that you appreciated the presentation, hopefully has some very useful information there. Lease payments seem to go up yet everyone likes to work from home. I think the -- one thing I'd say on leases is previously with our France building, we actually didn't have a lease. We had a month-to-month. We changed that in the 2024 year and we booked a lease. So that's primarily the reason for the lease payments going up. Other point I'd make is, yes, we certainly -- we have a couple of buildings looking to come off lease. You're exactly right. I think the -- yes, the market is far more in the tenants favor than the landlord, and we are negotiating reductions. We did Melbourne about 18 months ago and received a pretty material reduction in rent state where we were. So that -- that will be realized through the results over the next couple of years. The next question is, can you make a comment on what we are seeing in NEM registrations in Australia? There has been a material increase in batteries applications. Is the EOL seeing this in our order book for 2025? That's one for you, I think, Shaun.

Can you say it for me again, Guy, please?

Sure. Can you make a comment on what we are seeing in national energy market registrations in Australia, there has been a material increase in battery applications. Yes. Well, I've seen that in the pipeline to actual order book.

Yes, that's a very good question. Now maybe I can ask you jump forward a couple of slides for me because that was an Aussie based question I've got an Aussie-based slide. Just jump into that for me. So this is the Australia business. Australia, only software. We're not -- there's no trading services here, but so we get asked a lot, and I will answer that question. I just can answer the question before -- we get asked a lot, so that's really a mature market, what's going on with Australia. So what we see here is the consistent result for that market is that business, so a 13% CAGR over several years consistently produced as a result. That's largely as a result of us having a great position and great products, and we continue to make cross-selling and so on and win new accounts. But the opportunity there -- the absolute opportunity there is for us to pick up this tailwind for renewables. Now we all turn on the news every night and it's only again off again on the renewable stuff. But there's no doubt there are things coming forward, and batteries are one of them. Batteries are -- if I went back to that price slide when we look at new generation, batteries are absolutely coming. They are the hot topic of the moment. And we do have great technology for that. We have some stuff in development, which I hope to bring forward when it comes to fruition. And I'll mention that at the right time. But we do have the technology for this. Batteries are definitely to go at the moment, the hot topic. But for us, there's a lot of hot topics in the market over the years, right? There's always something that's the latest greatest. So we make sure we're servicing all of the components of the market, not just one of them. So batteries is important, but we also have solar and we also have renewables, we also have environmentals but we also have traditional sources as well, gas and coal and all the transitioners attached to that. So yes, we all hope the trend then the tailwind increases, but I can certainly say from the Aussie business that we have a really good business there. And if we pick up a tailwind and it accelerates, then the Australia business will benefit from that.

I think the only thing I'd add to that is when you look at the pipeline for CQ and I think it might be one of the further questions. Is there a number of battery opportunities? In the working through the question similar -- 2 of your customers have commissioned new assets in Australia recently, EnergyAustralia gas and another customer, a large solar battery asset in New South Wales. What is the revenue opportunity from existing customers, bringing new assets online? In particular, could you walk through the unit economics of the CQ business, it's revenue charge on a megawatt per hour basis? I can probably -- I'll answer the first one -- the last point quickly because we've said a number of times, we don't take positions on energy. We charge either on a resource being available basis or [indiscernible] basis so that answers that one and then Shaun, I think you can take care of the next question in there.

Which one am I replying to that?

The EnergyAustralia gas and the solar battery asset in New South Wales, what's the revenue opportunity from existing customers, bringing new assets online. I mean I think the answer really to that is we typically -- when you look at our retention stats at 108%, that's exactly what comes out of our customers bringing new assets online and the revenue opportunities. So we -- we do very successfully at existing customer base. Not sure. Shaun, if you have anything more to add on that one?

Yes, I do. Well, we grow with our customers, right? This is the point about the thing. It's not a fire or get single software sale. It's a growing-with-you story. So even big customers want to grow and they want to have new assets and they want development, and we're there to help them. So that's the cross-selling. That's the upselling, whatever you want to call it, but growing with our customers. So it's a very important part of the whole story for us, and it's important to have the technology to offer them because it's an existing customer, and I'm not commenting on these guys, in particular at all but if an customer wants to build a battery, say for example, with new battery tech, and we wouldn't be able to help. So it's important to be going forward at all times. We -- you can see on this slide here, we talk about the fact that in aggregate, we're the fourth largest generator in the net -- now we don't take a position. This is very important to understand that we are not prop trading. We're not trading on behalf of the in that sense, right? We follow instructions from our customers, that's their assets, we get paid by the month to do the work flat amount per month. So it's not profit share or anything of that nature. We are completely honest brokers in this. There's no moral hazard. We can provide a service to those guys who want to outsource that service to someone else. And so this is something we can offer to new entrants who may not have the capability to get involved and actually be active in the market on a 24/7 basis. Of course, you need software to actually interact with the market, not just people. So we do these things for them. It's a very important service. And as you can see, we're doing pretty well. I mean we've got -- as i said, fourth largest generator in aggregate. And something like 13% of the East Coast gas with excluded LNG import export is being managed by us on behalf of our customers. Next question.

Next question, is CQ classified as recurring or nonrecurring revenue. So to clarify CQ, all of the trading services that we do for customers is recurring and the advisory which is a mixture of a broker and -- CQ broker, which is broking risk products or advising on risk products and also just general advisory if the energy market is classified as nonrecurring and we do actually split it out line by line in our financials. You get a note to it before it splits it out in that nature. Next question is from Stephen at Veritas, is the CQ insurance market set to normalize?

Let me explain a little bit about how that works. We offer a brokerage service to our customers, between buyer and seller. We needed the buyer and the seller with a broker. And during that massive, massive volatility during 2023, obviously, the supply, there's plenty of customers plain demand for these types of contracts, these risk transfer, insurance style reinsurance contracts. There's plenty of customers for those, but there weren't that many sellers. And of course, they're coming back into the market slightly. We've said this in the report that we anticipate the normalization of that. It is an important business line offering for our customers. A very important aspect of their training businesses, and we're -- we're pleased to be able to supply them with that -- but yes, it does rely on both buyers and sellers as well as the broker. As all brokers will tell you, it has absolutely vital role in all transactions. So that's what we provide for them. And we expect that market to return this year.

Next question relates to the pipeline. So what's the pipeline looking like in Australia? If I look at the overall pipeline, it's grown across the year pretty materially. A lot of that growth, Europe's had a really strong pipeline all through the year, a lot of that growth actually come out of Australia in terms of the software business and CQ, not sure Shaun, if you want to comment, but certainly, the pipeline is a lot stronger now than it was 12 months ago. And that's your recurring revenue and projects as well.

Well, we've made a comment on this in the CEO report called about the pipeline improving. We did debate actually publishing the pipeline coverage type stats, but we decided not to do because there's a lot of -- it's a small enough market where the competitors might get the sniff of what we're doing. So please just accept the response that the market that the pipeline is growing, and we're getting better at marketing and sales, and the expectations will continue that way.

Next question is, does gross margin trend down since it grows over the years ahead? I mean, as I talked to CQ previously, it's a temporary dip in margin, the margin will improve in CQ, and we certainly see CQ was pretty reasonable margin, very close to software business. If you go back to 2023, '22 when we acquired it, we certainly see that turning around over 2025 and going forward, so we would see margin improving and...

I'd like to make a comment on this, the word CQ comes up quite a lot in the financial accounts we talked about, but I don't see it like that. This is Energy One offering a whole of market solution to our customers. We offer services and software, which equals a solution together. So one thing leads to another thing. And overall, the margins for the business, we've made it quite clear that we plan to grow the margin for the business and demonstrate to the market that we can do that. I don't wish to keep parsing out individual business lines because I think it's counterproductive. The -- we offer a solution to the market. when you take our services, you're also obviously taking our software. And if we didn't have the service, you wouldn't take the software. So they are symbiotic. I'd like to move towards maybe looking at the business as a whole going forward. But certainly, just for the year, just combined as Guy said, yes, there was this split. But as a whole, our goal is to grow that margin and demonstrate that we can do so.

Next question is, given the rapid expansion of data centers and the increasing demand for energy to support them, how does this growth in energy consumption, influence Energy One's product development, market strategy and long-term growth prospects?

Well, the market is kind of ramped up -- specifically data centers, that would fall into 2 camps. One is the contribution they make towards the DER side of things, which is behind the meter, distributed energy resources, virtual power plants, all that stuff, all that good stuff. And we're obviously moving towards that in the future and having solutions being in development for that. But generally speaking, there's an electrification of the market going on as we move away from gas as we move towards EVs because every time an EV is purchased, we're not -- we replace petrol with electricity. So the general consensus is that the market, the grid in most Western countries needs to triple in size over the coming years just to cope with electrification. And these kind of data centers contribute to the increased load as well going forward.

Next question is your comments around paying down debt imply positive free cash flow for 2025, but cash flow is typically weaker in the first half. Can we expect positive free cash flow in both half 1 and half 2 for 2025? We're only the latter. I expect to see positive cash in half 1, and we look at it from the perspective, we take EBITDA less CapEx, software CapEx, less leases. So that's how we measure which effectively gives us cash to pay into the bank debt. It's interesting, we've talked about not being a lot of seasonality in the business. If you look historically, yes, the second half is stronger. And that's because obviously the recurring growth through the year, where -- our staffing typically, the [indiscernible] kind of stuff goes through earlier under the year. So the second half tends to be stronger and the project revenue tends to skew towards the second half as well. But to answer the question overall, positive cash flow in both halves, are stronger in the second. I believe that is the limit of the questions that we stand at the moment?

Yes. Okay. Thank you. Well, thanks, everybody. We had 65 attendees. I appreciate that. Good turnout. So thank you for your interest in the company. Are there any more questions just before we close up?

Shaun and Guy, do you mind if I jump in for questions?

Sure. Sure.

That from Caleb?

Yes. Just a second, touching on the differences between the margins and the geographies. So I think Australia had about 32% margin and Europe had about 18%, which, I guess, makes sense, reflecting the growth OpEx and just the maturity stages of the businesses. But over time...

So you're -- you're talking EBITDA?

EBITDA. Yes. So, over time, do you kind of see Europe kind of catching up to Australia's margins as it grows? Or is there an environmental factor which kind of prevents Europe from posting a strong margins as Australia?

Australia is a business that's in a mature market in good shape. We've got -- we've been doing it for a while. It's -- so obviously, the margins are in good shape, and Europe is more kind of expanding, if you like and to a certain extent, the ticket -- ticket prices are smaller because there's a different type of product set over there. So yes, we're going to get to some point where we expect that leverage to kick on. And we do and generally expect the leverage, our operational leverage to improve now. But I just think that just reflects the relative stage in the life cycle of the 2 businesses. And at some point, there will be a leveling or equivalating whatever the right word between the two. They will -- they'll will trend back to -- they'll trend towards each other because at the end of the day, similar customers doing similar things. It's just a matter of how long you've been doing it.

I think, I mean, you'll see that start to equalize through the 2025 year.

Andrew has got his hand up. Andrew Tan.

Yes. Not sure we can hear you, Andrew. Did I say Stephen had his hand up? Maybe not.

Sorry, Andrew, we can't hear your mate.

Yes, he's put it in the chat. So any color on the specific products that drove the sales growth. I mean, yes, we've talked about effectively a geography or business line. So Shaun, whether you want to expand any further on that?

Well, our -- in Europe, our physical scheduling products are obviously selling very well. ETRMs tend to be a bit larger and a bit more of a slow sale, more of a project-based sale, but we -- one of the diversifications that we've come across that we've developed has been to have large and smaller products or some things I was selling. And so there's no doubt that scheduling is day ahead and intra-day, I showed those two graphs from Europe, those 2 maps. It just shows that there's a lot of interest in those markets for the kind of physical day ahead and intraday markets, huge interest. So that's what's selling over there as well as not to mention our traditional cross-selling to our existing customers, which is still an important part of the business.

Next part of the question was FY '24 an unusual year for new customer wins, are you confident this level of SaaS growth can be sustained or increased over the next 3 to 5 years? I think, I mean, I'll cover the backward looking or maybe the current backward looking first and Shaun can talk to the -- talk to the forward-looking. But if you look at our growth, I mean, it's been pretty consistent for a couple of -- couple of years now or 4 halves, however you want to phrase it. So I think we're pretty confident around that. We look at the pipeline, we've got good cover for our revenue going into 2025. So from that perspective, we are -- Shaun I'll let you comment further.

Well, I'll take you back and you go back to the metrics slide for me, please. Right. If you look at customer installs, the growth tree there as 37 -- 38 actually customer installs in a purely organic year. The year before, okay, it was a bit suppressed but we had a big inorganic growth there as well. So we set our capital in increasing our sales and our margins. And that's what we intend to do. Am I confident that we can do that? Well, if I wasn't confident we wouldn't continue to grow the business then. We would be on the wrong track. So yes, we are consistently -- we're confident we can grow and we're investing for growth. Thanks very much. -- Someone starting motorbike in the background there.

Next question is, could you please describe to us how you're looking about cyber risk? And also how confident you are on the timing of achieving ISO cybersecurity certification? Is it in your control?

So cybers' topic du jour across the globe. We're no different. We're focused on the cybersecurity aspect rather than the accreditation part because at the end of the accreditation of credits what you've got rather than writing policies that are not having the measures in place. We've concentrated on really beefing that up in the accreditation part, follow more naturally. It is somewhat in our control, but it's a matter of what priorities we put in place, and we're putting a big effort into it. We have a full-time CISO now, which is something we didn't have in the past. His job is to push that through and being a little bit vague on timing because there's always stuff that we need to get on with and there's other priorities as well our customers to look after. But we want it as much as everybody else wants it. And it will help us kick on in the future as well. So there is a very high priority, more than $1 million being spent on it this year, much more. And so I can assure you we see as a high priority. It's not a housekeeping thing. It's a critical part of the next 12 months or so.

Sorry, there's another question -- I'm sorry -- the impairment testing assumptions, what is the basis of the growth rates in your impairment testing assumptions? What has driven the changes from the assumptions to '23 to '24? So basically, our assumptions are built around historical revenue growth projections. And the reason we used those was, we thought they were a good -- as good a proxy as we could ascertain of the growth moving forward. And if you look at the rates traditionally, we actually had to exceed them. So we view them as somewhat conservative as well.

Thanks, everybody. So hopefully, that was useful. The recording will be up on our website. Thanks for your interest in the company and continued support. We're really looking forward to getting stuck into the year ahead and looking forward to reporting you to you again at half year. So thank you very much, and have a great day.

Thank you.

Thanks, everyone.

Thanks, Shaun.

Thank you. Bye.