Hansen Technologies Limited (HSN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Hansen Technologies Limited results briefing conference call. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Hansen, Managing Director. Please go ahead.

Thank you. Welcome, everyone, to the call today. I'm actually joined with Graeme Taylor, our Chief Financial Officer, to walk through our results. Look, let me just start off with a public congratulations to the hardworking, amazing, talented staff at Hansen. My ability to lead such a talented bunch of people and to get this sort of outcome really has to go to them in the stage of like COVID-19, this pandemic. So to kick things off, I think most people now have seen the presentation online, but to explain Hansen just briefly, we're a global company servicing the gas, electricity, water and communications industries. We have over 580 customers globally. We have software installed in some 80 countries, and we've begun deals with Tier 1 or Tier 2 customers. In fact, I'll put in your mind, I know one of our customers in India we just signed up has 450 million mobile phone subscribers. So it puts things in perspective when you start looking around the world. But basically, we create, deliver and engage. And I'll go into it a little bit later on but basically, it's what our software does. Certainly, in the gas, electricity markets more recently, not only regionally entrenched but we are still more of a global challenger to the bigger players, SAP and Oracle, and winning share from them, which is exciting for our team. And certainly, communications sector, you would understand with the rolling out of 5G, et cetera, agile innovation, being quick to market as they commercialize that is probably a lot of things why our customers are now coming to us to help us commercialize those opportunities. So the Hansen mission is always to grow best-of-class our software. And what we've done that over the years of not only developing software but actually aggregating mature and entrenched predictable businesses in our region. We can talk to the industries we serve. We're not double-digit growth, but what Hansen does is that aggregation is just proving time and time again our success as we move forward. We also look at the opportunity to actually cross sell. Cross-selling is to us is getting a new product into the mix and taking it to existing customers. And clearly, the driver always has been our Hansenisation of the aggregated businesses. We have proven agile technologies, very predictable management systems and reporting, which is that Hansenisation and that rolling out. Diversification, look, our diversification at Hansen has always been that the mainstay in my years of tenure at Hansen have not -- really wanting one -- any one egg in one basket. And that vertical, so the verticals we support being gas, electricity, water and telco across 80 countries, et cetera, and that customer diversification really comes home now in times like the pandemic of the stability of our business, which is very, very reassuring for us. And further opportunities, so there is no doubt that we have a very, very disciplined approach to buying those businesses, and we will continue to do so into the future. To put Hansen in context for this year. Look, it's worthwhile just talking about the -- I think we, like a lot of companies, when COVID-19 happened, we saw that probably pretty earlier on actually some impact just from our office in China, in Shanghai. So we, like everyone else, was a bit uncertain of what COVID-19 was going to be doing. So we established basically a war room inside our business with our leading global executives to bring the data through as quick as possible to see what was happening. Not only what was happening from operations but also what was happening from customer feedback and industry feedback. We at the time -- look, we didn't know what the impact to our business was. So we modeled another thing. But I think probably the most basic model we had that we thought during the year, we could have as much as a 15% decline in revenues. There was no science to that other than we just thought that we will have disrupted in some of our own customers their ability to transition technology-wise or moving from people at home. We just thought some projects, upgrades, new deals might have slowed down during that period of time. I think the other thing which we quickly focused on was the acceleration of integration of Sigma. I think each time we move forward -- once upon a time, we would allow a business to run for maybe a year or 2 under their own steam to watch. What we've actually learned now going forward is just that acceleration of the business. And it was times like this that we just cut as quick as we possibly could to Hansenize the Sigma business to great success in our business. We also had to quickly define how we could work from home. Look, and those who have heard me talk before, we had, I think, in a matter of like 10 days having a global operation working in offices to having everyone working from home. I hate to think if this happened 5 years ago or 10 years ago, whether the technology, the Internet, et cetera, would have allowed us to actually have got there. But it was -- I couldn't believe how smooth it actually was. And also implemented the regional management structure. We quickly saw the lack of people flying around. We want to start focusing on region and time zones for our management. And what does it lead to? Well, clearly, the customer impact did not eventuate. And I say that to date that our projects all maintained. The work from home, I think one of the most amazing things was that we predicted the trajectory of projects by working from home, some of that productivity would slow, but that was not the case. And we exceeded the EBITDA guidance of our business, the structuring, et cetera, which we'll go into -- Graeme and I'll go into a little bit more detail. So that's the context of our business during the year. I know that as a lot of other public companies are coming to, they probably have a similar context. But to do it with a record year, we are truly very excited about. Just for the purpose, I'm not sure a lot of investors on here. We're hearing people talk. There has been a degree of confusion in the marketplaces with really the bringing of the IFRS 16 changes to accounting. Traditionally, companies like ourselves, we go back to do a comparative to previous periods, et cetera. The trouble is, for Hansen, not an enormous amount of detail, but around about 10% of our costs are attributed to COVID 16 (sic) [ IFRS 16 ]. So what I've done is actually show the comparative. So the first comparative numbers I've put there is showing our history back to 2015, of what the impact would be, if, in fact, our numbers were presented to you today without the IFRS 16 amount, showing what would have been a $78 million amount. The next graph I've done is reported. So this is as our obligations are to report to, which is go to the marketplace. What Graeme and his team have done, that recast our historical numbers to reflect what it would be if IFRS actually had been around since 2015, to just show it. And then lastly, the underlying. There is no doubt that we've had a significant number of changes in one-off costs during the year, which amounts to around $5 million of -- in the second half of removing from the company just through the automation adoption of best practices. I think one of the great results when we put these things together is to look at the CAGR of circa 20% across that. And I'm not sure how many other businesses do that going forward. The headlines, I'm very proud to announce an increase of revenues at 30%. We're acknowledging that Sigma came into it, but we're acknowledging we're an aggregator of businesses. The reported EBITDA at $80.7 million, which has been annualized at 26.8%. And most people understand, historically, Hansen has always reported -- has always talked about a 25% to 30% EBITDA number. The underlying NPATA coming in at $47.4 million on a 41% increase. I think in the past, we've worked really hard to make these results as clear and concise as possible. And there's 2 things which actually come into the -- in the way Hansen reads it. 97% of all revenues which come into Hansen are actually derived from our own IP. And in the past, there's confusion about license fees and maintenance fees and support fees and what they all are. But the headline number is only 3% of our revenues coming to our company, where we do not own the intellectual property on what we actually sell. And that is so important to investors because that gives you stability in our business. And revenue visibility, the way we measure in -- that is our view. Whether it be contracted or new deals or change requests, et cetera, it's the visibility number which we look to and just how much visibility we have into the future of our business. Flowing on to the adjusted earnings per share, up 40% to $0.239. I think a lot of investors -- interesting, a lot of our investors want us to continue to spend our money wisely and actually not pay dividends. But in this particular case, the Board thought -- and I know that, Graeme, you'll talk shortly about capital management. But given the cash-generative nature of our business, we thought it was appropriate to lift our -- the final dividend to $0.05. And based on the cash reserves we have is also provide an extra $0.02. The other thing which is significant, debt has never been an issue with Hansen because we do make a lot of money. But in the last 12 months, our net debt, we've paid down nearly $35 million worth of debt, which, when you look at the dividends, we're paying tax and working capital once again adds to a pretty amazing result. Graeme, do you want to maybe talk on the results, please?

Yes. Thanks, Andrew. Look, it's fantastic as you're pulling a set of results together like this to be able to see the success that's being generated here. Speaking first of all to revenue, $301.4 million. And of course, we all understand that the second half of the year has been impacted. And as Andrew spoke before, integrate outcome, revenue growth has been very strong. We've had some great sales across the year. And Hansen, the core business that we call Hansen has performed very, very strongly with some good growth across each of our lines of business. Turning to EBITDA. Of course, we're talking here at a reported EBITDA level. As Andrew talked to before, great outcome with 34% growth. We're starting to see some efficiencies come back into the business, as we talked to before, with leveraging of the lower-cost development centers that we have now across both Vietnam and India. General margins are starting to creep back up after having made some investment in the past years in some of our infrastructure. And of course, it's great to see that accelerated integration at the Sigma business. That's allowed us to further improve and generate margin improvement within that business as well. It's always one of Hansen's strengths that we take our proven methodologies, what we like to call Hansenisation, and we apply that to the new businesses we bring into the group to help them generate better outcomes, both from a new business front and just generally across how they look to manage new investment and the business more generally. I think the other thing that's important to understand, Hansen's performance across the year has enabled us to just achieve all of this without any material government or general subsidies around COVID-19. We simply haven't had the downturn that's been required for us to utilize any of that. So it's important to understand that we have done this pretty much unaided. Underlying NPATA. Again, a lot of this is generated through some tax management strategies that we have deployed across the year. Effective tax rates come down to 13.7% as we've been utilizing some of the acquired tax losses in some of the businesses. But generally, we're, as expected, starting to see profits now really offshore out of Australia. U.S., European tax rates are much lower than the effective tax rate here in Australia. And generally, we're able to manage that taxable impact quite well. I think a little bit on debt. It's not a big deal there. We manage that debt and capital pretty well. But being able to pay down the debt as we have across the year really has had a great improvement on our interest bill. Margins have come down as we've paid that debt down and with an annualized saving there of about $3 million just on the interest line as we look to go forward. Reflecting for a moment on our capital management policy. I think everyone understands that we used debt to acquire the Sigma business. And that's really given us the opportunity to be able to see some significant improvement in earnings per share. We try not to dilute shareholders wherever possible, and we'll continue to use debt where appropriate as we look to continue to aggregate into the future. So this ability to pay down debt has certainly reset the balance sheet to a degree. And as I mentioned before, EPS has also been enhanced a little bit as the gross margin across the business and our EBITDA margin continues to improve. Look, Hansen's always -- that core business has always been fantastic at generating very, very strong cash flows. And it's been one of -- our general philosophy is to pay down the debt. And this has really demonstrated quite strongly again to our banking syndicate our ability to generate cash. And we have got great support from that banking syndicate. And that support will continue into the future as we look at new opportunities. So look, total available liquidity is some $61 million, cash of $44.5 million and $16.6 million left undrawn in the debt facility. We've actually paid -- reduced that debt facility a little bit again to keep managing the costs associated with it, with nothing in our immediate future requiring that level of ability. But I remain confident that the banks will provide us whatever we're looking for into the future. Looking at the dividend story. Look at base dividend, we've paid a total this year of $0.08 at the base and a special of $0.02. It's one of those things now where, with the strong cash flow we've generated, the Board felt it was appropriate to share with our investors the rewards from this year. And I think it's a testimony to that business that allows us in COVID-19 to probably be one of the very few businesses out there actually increasing our dividend. It's a great outcome, and Andrew and I both -- and the company generally are very proud to share that with our investors that have remained loyal. Turning to the cash flow. There's a waterfall there that I think is really pretty self-explanatory as we look to determine how the cash has been generated out of our reported FY '20 EBITDA. A little bit of capital -- working capital unwinding. I think everyone that's been on the journey with us understands that there's a little bit of a cyclical effect on working capital, with some of the working capital building up around our half year. That unwinds very quickly, and we've continued to see a little bit of that, which, again, is against the typical COVID trend. We've got great customers that are out there. We're linked with them on a very mission-critical basis. And so our cash flows and our underlying AR balances continue to be managed well. CapEx, project development, these sorts of things, of course, we spend and invest in our software to keep it relevant. And we invest in our business more generally across the world to provide us a very strong platform in which to continue to deliver the growth strategies we have for this business. Interest, I've mentioned before. Free cash flow, $44.2 million. And of course, with that level of free cash flow, we've been able to pay down our debt and, of course, deliver some dividends to our shareholders. So great outcome and really, really strong position as we look at our balance sheet and the future before us.

Thanks, Graeme. Look, it's probably just worthwhile recapping a little bit more detail on some of those achievements because, no doubt, we're as happy as everyone else about the performance of the company in this backdrop of what's been taking place, but there's been some lessons from ourselves. Certainly, the acceleration of the Hansenisation was the speed up of the Sigma business and eliminate duplications throughout the company. It's not done in one business or another. But the Sigma name has been quickly synonymous and been rebranded Hansen. And having separate teams of finance, marketing, IT was very, very quick because that's where the profitability is enhanced from the business. We don't need 2 people doing the job of 1 going forward. There's always this ongoing focus, and Hansen and those which have followed Hansen in its 20-year journey as being a public company, we've always been focused on profitability. We do not believe in profitless prosperity. And also, I think a lot of lessons have been learned from the speed of integration. I touched on that earlier, but I think backing ourselves, and I'll touch on that a little -- another slide or 2 about those. Transitioning from work to home. I think this has an impact to a lot of companies. And we're a bit unsure, but it did happen very, very quickly. And one of the things is we became also, for our customers, a degree of stability for our customers as they were going through some of their own issues. The fact that the same levels of support were there, the same levels of contact were there just made that transition. There was not an issue with customers getting their bills out or signing up new customers. It just worked so seamlessly. There's no doubt that Hansen enjoys a tried-and-tested management team to grow those. But along the way, the team's expanded from myself and a couple of others to a senior management team of some 25 people, which are the senior execs which run the company in totality. And the very fact that we could actually roll what is the global services across the whole company but then have very close regional management, which are looking after sales and customers in the 3 regions. So those regions as we see that we've articulated before is the Americas, is APAC and EMEA. Customer satisfaction. It's probably a hard one for people to understand, but in all business, customers churn. This year, we've had a net gain of 103% of customers. So a few people have gone for whatever reasons or merged in with somebody else. But we've ended up with more customers at the end as we do each year. What's been interesting in these last 6 months that -- we didn't see any of our customers deviate from upgrading or refreshing technology. They maintained the journey the whole time, even though some of them were problematic because of their own abilities to keep up the speed. But across the board, it worked well. The foundations of our global team is follow the sun support. One of the great things Hansen has is that follow the sun means there is someone in Hansen working 24 hours a day. And so whether that's working on a marketing initiative, accounting initiative or whether you're supporting a customer, there's someone across Hansen working the whole time to support the business in totality. And we're very, very proud of that and work very, very hard. So that goes across your finance, your IT, your admin, the whole base of the business. Certainly, in the last 12 months, we've maintained our R&D investment. Hansen has a very focused approach to R&D, which all has to provide a return on investment. Our -- the management team signed off all of our R&D because we're trying to make sure that it actually works. It actually is suiting what customers or new prospects actually want. The continued investment, Sigma opened our eye much bigger. We're already in India, but having a lot more people in India has helped us, along with Vietnam. We're still maintaining those 2 investment centers. And as I've discussed before, I think the amount of staff we've got there and their abilities to hit the ground running has just -- keeps on exceeding our expectation. And we do have an ongoing investment, which has been these last 12 months of our back-office systems. When you start your business up, you can do your accounts in a spreadsheet and you don't need payroll. As we get bigger and bigger, data is really important to Hansen as we run our business. And so whether it be our internal admin systems, IT systems, HR, finance, we continue to make sure that they can grow and can assimilate businesses as we acquire them and they get aggregated into our business. And clearly, the -- I don't -- just to go too much over the key achievements that Graeme has already talked about. But the record in revenues and profit, the stability of those revenues from our own IP, and the visibility and that free cash generation, it's the very heart of owning your own IP and that ability to make the right sort of investment gives you a lot of assurances about the future. But basically, all those achievements gave profitability improvement across the business. There's no one area -- to make this level of money does not come from one area. It is an event which comes from all aspects of running the business more efficiently, better account management for our customers, et cetera. So that profitability across the business is the way we actually see it. Just to touch a little bit on talent, the new word for staff, I guess. I hope my HR Director is not listening to me at the moment now. So I should use the correct word, talent. But look, I think our people have adapted really well in the COVID, working full time. I'd probably make a side comment. I think, historically, Hansen, like a lot of organizations, has always been an office-based business, and that's the way we've seen it. I think what we've noted in COVID, the flexible ability of working from home will probably change some of our modeling in the future. And I -- we will not be the only company which may have 25% of our staff not return back to the office. We've been able to retain all of our key staff, which we targeted at the very start of this. Very proud also, and given where we operate, so globally, that we've had no cases of COVID in the workplace, we've had no office contamination. And we have a team which have been running the return-to-work strategy, which covers all sorts of areas of how many people come to the office, the time frames they come to the office, the work spacing into the offices, et cetera, because we don't really want to have any situation where we can have a key or core group of staff which are exposed to COVID-19. So we're running with that. This thing noted there is 74% of our staff are actually based in the country where the customer or the product is being supported, which means that we're -- from a cultural point of view, when you go around Hansen, you go to our Finnish office or our Swedish office or our South African office, they're actually local there. Whilst we're an Australian company and Hansenisation is something which is core to the core [ 10 ] people, it's something which we're able to take out and place around the world, following our reporting, which works for us. Staff. There's some staff numbers there, around 1,400 staff at the moment now. I love the fact we've actually got -- 100% of our staff are now looking flexible. I suppose we have to say that. But as I touched on before, I think there will be some longer-term changes to our business. Gender diversity. A lot of our numbers are submitted to governments around the world and we exceed that area. But we currently have 66% male, 34% female, which is a great way. We've always hired the best person. We've never specifically said it must be male or female. We don't think that way at all. But interestingly, in 2020, so far, 39% of all new hires have actually been female. So that's quite an interesting stat, which just shows that gender balance in Hansen has never been an issue for us. The age diversity is -- technology becoming a second-generation industry at the moment now. But 1/3 of our staff are career-establishment age. They're out of university. Those people are still trying to get themselves established. And we need that young blood through the organization. But the other 2/3 have got more than 12 years' experience. So that ability, because we are selling subject matter expertise, to actually have that 12 years-plus is important to us. Based on the acquisitions, et cetera, now, look, our average team has dropped down a little bit from what it is. But the IT industry is circa 3 and we're at 6.4. So that ability for us to retain and keep people over the journey is first place. And from a leadership team, I'm very proud to lead a bunch of very, very experienced managers, very, very committed managers. And they have an average of 17 years' tenure within the organization, which is probably quite astounding. Hence, we do keep on being able get these sort of results and look to the future to keep on improving. Look, just a little bit on drivers to our success and to understand our success. Hansen is not a double-digit organic growth business. We deal in very, very predictable, mature and entrenched businesses dealing with telecoms and energy and water. We all understand you all get your bills every month, and that's what we actually do. We know that our success -- whilst we are making lots of new sales, we do know the benefits for long term is the accretive nature of the aggregation of these businesses going forward. And so we -- that best-in-class billings provider, that's what we wish to be, those drivers to look at strong, profitable, cash-generative businesses. We do want to be a mission-critical software. Mission-critical software is the reason why people didn't -- they can't cancel. If you stop using -- if you wish to turn off Hansen software today, it means you are no longer building products. You're no longer selling to a customer. You're no longer billing to a customer and managing that customer life cycle. They are modern and feature rich. We -- most of our software is in a case of constant evolution. Our software has been upgraded with some customers on a daily basis, some monthly. So that whole technology -- based on technology, cloud, et cetera, is meeting what the customers want. We do know for future opportunities that our competitors are still fragmented and regionalized. There is hundreds and hundreds of potential customers out there. And we think that COVID-19 will provide more opportunities. And I don't necessarily think it's our IP, and I don't like to disclose it outside. But for the purpose of those listening at the moment now, why would COVID-19 provide further opportunities? It's because companies which know their business is a bit stagnant but they're still making money, the ability for them to expand into new countries and regions will actually be quite problematic for them during this pandemic and beyond at the moment now. If you look at the footprint of Hansen with all our offices, 30 offices around the world, and where we sit in our knowledge around the world, we're in a far better position to actually acquire a business in one of those new regions than someone looking to expand, and we want to take that. We are highly disciplined and focused on the most accretive acquisitions. I like to bore people, but sometimes we should be rewarded on the decisions we don't make. We look at lots of businesses. And it's not as though we don't want to buy them, it's often the timing or the pricing is actually wrong. And if you look at that CAGR of 20% [ here ], you'll actually see that is the trajectory we've aimed ourselves on. We're really willing to back ourselves as being best-in-class in actually buying, acquiring, integrating businesses that's out there at the moment now. We've done this for 20 years. In fact, I did this before I joined Hansen as well. So this is something which is real to me. We are also very industry and regionally focused on expansion because there are certainly some industries which provide more opportunities and also that regional focus of that expansion because we know there might be further opportunities with new data hubs or new products or deregulation we follow. It's always the bull's eye. We call it the bull's eye at Hansen. It's very much focused on the industry, the region, ownership of IP, the customers and the billion customer support services. And that's our bull's eye, what we're looking for. Notwithstanding that, we do know that we want to deploy our process and methodologies. In fact, a very simple way to talk about the Hansenisation approach is actually we get people to spend money like it's their own. It's such a simple thing to say, but it's so ingrained in the business that by spending money like its own allows Hansenisation to actually work for us. Diversification. At the moment now, we are 2 industries. We are the energy and the telco in the 80 countries. There's not -- we have and we will continue to investigate other industries. We know there are other industries which could make some benefit of what we're doing at the moment now, and we think that will continue. We'll continue to evaluate and look at some of those opportunities as they present themselves. A bit of a slide here on what we actually do. But you look at the slide, it's the evolution of a customer, which starts with someone wanting to build a product, finding one of their customers to buy it, to bill and rate them, and then managing that customer care and retention. That's what we do end-to-end. In some cases, we just do one part of it, but it's the end-to-end of what we actually do. So that -- they created, innovated and defined, but building new and bundled and all the buzzwords, the Internet of Things is telcos are now looking to monetize their investment in 5G, et cetera. So we work with people at the moment now, how our software can quickly bundle some of those elements to being a new product. So you've now built a product. So then you have a customer life cycle. So you've now got to -- you're going to price it. You've got to quote it. You have to acquire it. You got to fulfill it. They're all the aspects of when you've got the product to go. Now you've got the customer. So now you've got to aggregate all the data, the network, passing, pricing being a whole bunch of complex issues together to actually so you have that financial relationship with our customers, end customers. And clearly, what is so important to people is that customer retention, the works which we actually do around the engagement, the multichannel communication, the analytics of what we're doing, giving that data back so our customers can try and reduce churn by keeping their customers happy, finding new products for them to sell. And you can understand our products and what we sell to the marketplace. It's all about leveraging all aspects to ensure our customers can try and be future-proofed with Hansen, which only means we never try to give them a reason why they should look to an alternative rather than actually buying off of Hansen. In the slide here, look, it has been a very successful year in sales. And we don't necessarily always like to talk about sales. It's not always material. But there's a little bit of us sharing knowledge with our investors but not necessary to share with our competitors on what we do and how we're going about it. But this year, it has been a record license for new logos and license wins in the year with over $70 million of new contracts being signed up. And in the expanded -- in the Nordic position, which is a very strong market for us, I won't go through these names. These names will be known to a lot of you. Certainly, cloud and products, some of our customers wishing to embrace cloud. We've always had an absolute philosophy that it should be the most common-sense thing of where something sits, whether it's on premises, whether we host it for them, whether it goes into our cloud or it goes into the global cloud provided by third parties. In other words, there's not one thing which is all. And you got to be very careful about this because the way pricing works, some companies actually get better by actually running the piece of iron or tin, which runs them in-house than putting it in the cloud. The cloud is a bit of a buzzword. And that's the way we actually see it. And that's why we have 4 different options for our customers to actually deal with. Digital service enablement. There's no doubt that digitization of certainly some of the services we provide is not just restricted to the telco markets, the energy market as well as those moving around. And the last one is the agile and the 5G enablement. The energy market -- the telco market has spent a significant amount of money in 5G licenses at the moment now and are trying to find things for us as consumers to buy. And I think that enablement is the way this market is going to be driven now. And we will start to get more offers. We all know that 4G gave us real-time. 5G is about to give us things haven't even thought about now and essentially working. So hence, you can understand why some of these companies here we're talking to are coming to us because they're looking to sell new products which they've never sold before and trying to use our configuring, pricing and fulfillment and provisioning software to provide those new items to our customers. I'll probably touch a little bit on future opportunities, et cetera. But what we're looking for, they have to -- the business we look to do have to be robust businesses. And I talk about IP. IP is important to us because in the transition of ownership, owning IP gives us a period of time to work closely with those customers to get them winning them over to the Hansen way of going forward. We do have the slide on here. There are some regions where we want to go forward. We also look for complementary applications. We think that's important for us going. Then how do we go around the evaluation? Look, we've done this for 20 years. We often [ recut ] the people we buy and look at the financials under our management methodology, the way we would run the business. And then we are very uncompromising on the strategy and the financials. We don't have to buy business. We just want to have to buy business. And we said we don't fall in love. Before we always sign the dotted line, I sit down with the executive and we look do we want to do this because we've always got other opportunities to look at it. And I never make people ever talk about our reporting periods or we should close it now because of the reporting period. We're a long-term business, been going since 1971. That's the way. So then how do we go around capital management, knowing capacity? Graeme talked about it before. It's a bit like asset guys. You can buy a house. The moment you buy any asset, it's subject to finance. We get a better price. And that's capital management, knowing what our debt, working very closely with our managers. We want the internal volume. That's my team saying let's proceed with this. But a lot of the plan is actually done at a due diligence phase. We -- in fact, we don't spend a lot of time historically looking at the business. We spend most of our time how will it be run by us and what we'll actually be doing. The team have put here together the aggregation strategy. The aggregation strategy is actually just highlighting. Certainly, if you look at from year 2013, that gross -- the acquisitions of our business, that combination, I would [ assume ] low single-digit organic growth, which we have naturally in our businesses but where the aggregation coming through. I know people are going to ask the question, what's the next deal? Well, I can't tell you what the next deal is. But I can tell you I think there is a bit of COVID impact at the moment now. Our ability to execute a transaction at the moment now overseas, where we can't travel and look in the whites of the eyes has been impacted. But that's the same as probably every business at the moment now. We do have teams around the world which can actually be involved in this. But I think COVID, you'd all understand has provided us just a little bit of a question mark rather. That's actually detailing too much. But to be honest, guys, we're never going to probably tell you what the next deal is because I can't tell you what the next deal is. Hansenisation approach. Clearly, identifying the margin improvement, as we've already talked about. Very simply, the 30, 60 -- the 30, 90, 100 (sic) [ 360 ] days is all about really simple messaging of what we're doing for staff and customers reporting so we talk the same language and the full integration of the business. And that comes from our 40 years' experience. We do want to aggregate that mature, predictable customer base because it's had predictable cash flows, which we're very interested in, and I think all of our shareholders are. The same thing with our aggregation and integration. We just had a great [ week ] of fully integrating the business. We don't allow this business too long to run by themselves and drive our margins. And the future opportunities, all are broadening our foundation, deepening our talent pool and derisking single points. We go forward. I won't go into detail. That's the way we see the world and the maps of where we have strong presence and where we think opportunities are. But largely, this is a very, very diverse, broad market for us to continue to grow our expansion as we go forward. Quickly on dividend and just capital management, Graeme? I've taken up too much of my time talking about the other things, so I do apologize. You've got 10 seconds.

Thanks, Andrew. Look, I think with this dividend that we've put out in the market, I just want to spend a little bit of time talking about capital management as we move forward. Look, I think the Board clearly spend a lot of time looking at and understanding how to deal with this and at what level we share our profits with our shareholders. I think going forward, it's clear that we'd like to target an underlying dividend of around $0.05. And I'll use that word "target" very specifically. Clearly, there's a balance as we look forward, understanding what we're going to do on the aggregation of new potential targets and getting that balance right as we look to reset the balance sheet. So look, it's fair to say we'd like to think that $0.05 is the future, certainly more than the old underlying $0.03. But the Board has to consider where the business is and how it's moving forward as we look to do that. Of course, this year has been fantastic with the strong cash flows and so forth to enable us to take this quite profound approach with declaring the dividend, the final dividend as we have. But it's been done in an environment where our leverage ratio has come down significantly and where the business is well placed now across the board. Look, the numbers there speak for themselves. Banks are very happy, very supportive, as I mentioned before. And I think the business is really well placed as we look to move into what the future holds for us. The slide, Andrew, that everyone wants to know.

Well, I think everyone would understand at the moment now, everyone, that we deal in a world of uncertainty and we're not fools. I think we don't have a view, and we're trying to understand what's the view and what's going to happen in the global recession. We see second wave happening through Europe at the moment now. We're finding people which have now got their second case of COVID-19 with the strain going on. It would be remiss of us to make any commentary and put anything out there about the near future, what's happening in our business. And so we will not be providing any guidance for our business. But on the positive side, and I think what you have in Hansen, this is a -- I sometimes look -- I don't really necessarily ever comment on share price. I sometimes think people don't truly understand the investment in the asset which they actually have. This is such a long-term proven asset. It's an Australian-based company which now derives 85% of its revenues overseas. We have successfully gone overseas and taken the Australian flag with us as we've actually gone. You have a very highly proven and talented executive management team which have worked with me for a long time, average of 17 years. This -- I'm not sure on how the business as you go over, just how predictable and the cash-generative nature of our business is. This is such a unique business. We are the owners of preeminent software at the very heart of our customers. We are market leaders in what we do at the moment now. We do deal in very mature, established industries. I think you need to understand is where is the risk coming from in our business, where is this disrupting coming from. We're not immune to it. We're looking at it the whole time. But whilst the industries we serve are looking to sell you gas, electricity, water or telco services, they are very much established, and our software is very, very relevant to them. It's a high barrier to entry, this -- the average implementation of our software is anywhere from 6 months to 2 years. So the decision for someone to leave, you've got to really do something. And so that high barrier -- the churn of our customer does not happen that readily at all. Subject matters in our field. We -- pound for pound, kilo for kilo, we've probably got the best people, the best experts in our field. And that's why traditionally, we started relatively fighting above our weight to very big players in regions. But our knowledge, our resourcefulness in actually getting the right people there, but more the [ referenceability ] from our customers is what we actually do. 97% of our revenues come from our own IP. To understand a business, you -- our services can't be bought from somewhere else. You can't get maintenance from somebody else. You can't get change requests from other people. That needs to be known about. Track record, 30-plus very successful acquisitions in our -- and those aggregations as we've gone through our business without any of them ever filing. And I think that's the playbook for how we do that for a very bunch of disparate customers. Because there are lots of people out there, we truly think we've got a fantastic future ahead. On that basis, I now will hand over to question and answer. But I really thank you for your time. I know this has dragged on a little today. I hope most people appreciated a little bit more granularity in some of the numbers, et cetera, and the way Hansen goes around things without disclosing too much of our in-house DNA and IP. So I'll hand it back to Rachel now and we'll present any questions if anyone would like to ask a question after this very, very comprehensive presentation.

[Operator Instructions] Your first question comes from Nick Burgess with Baillieu.

Just a couple of questions on sales. So you mentioned, Graeme, that the organic growth rate of the business for the year was 2.9%. And I think it was down a couple of percent in the first half. So do you have a sense of what the organic growth rate of the business was in the second half? Presumably, it was reasonably strong.

Look, I guess what we're talking to there, Nick, is, of course, yes, it's been reasonably strong. But we don't like to set expectations around this as we say because our organic growth, the way we look at it is really we're 2%, 3% organic growth business average over sort of a 5-year time frame. We've had a great success leading into the half with some new businesses. And of course, we have delivered some of those logos in the second half. So look, I know everyone wants to think of us as something much more than that. But it's really -- that's the underlying story. Energy tends to be that way. And the communications sector, obviously, we're getting a little bit of a boost through Sigma and so forth. But 3% is really where we're focusing going forward.

Okay. That makes sense. My second question is you pointed to the -- sort of related area. You pointed to the new business wins totaling about $70 million of contracted revenue. If we're trying to look at that at an annual rate, what's the sort of average contract tenure that you might apply to that to give an annual rate of that revenue?

Look, again, I guess I'm answering the same question twice in a sense, Nick. That $70 million is the contract term that we talked to with those revenues over what an average sort of contract of about 5 years. So look, again, we're making the most of what's out there in the market at any given time. So -- but we don't disclose an annual rate around that.

Okay. Anyway, 5 years, that's helpful. And I might just ask a last question in terms of some of the restructuring work that's been done, obviously relates to the integration of Sigma. Should we think about that restructuring and the costs associated with that as having drawn to a close now? And I guess a related question. Given the strength in the margin in the second half, should we think about the margin performance as being a new base? Or you might expect some ongoing volatility in that margin performance?

Well, Nick, we'd hope not to have that ongoing volatility in margin. I think the margins come from that increased -- that speed we brought the Sigma business together. And you understand the integration business comes from both sides. It's actually who's the best person to do the job. We don't do it based on tenure, et cetera, Nick, when you're actually seeing it. So have we finished it? I would like to think we will never finish in our business, ever trying to optimize the bottom line of our business. I think we will keep a close eye on what's happening at the moment now, Nick. I think, clearly, the majority of that restructuring is taking place. I think further restructuring will probably be a little bit more probably in some of the regions but just got a bit more optimization. And we've got some investments still going on at the moment now to further drive some of those benefits as well, Nick.

I think the only comment I'd make there, Nick, is that normalization number, that $5 million, you're not going to see that level again next year. We've taken the opportunity through the integration of Sigma. And as Andrew mentioned in the early part of the process, when we were looking at the business and how the business should trade going forward, we really have done what we needed to do in order to set us up for a new Hansen going forward.

Your next question comes from Jules Cooper with Ord Minnett.

Andrew and the team, look, absolutely fabulous overview there on the business. I really enjoyed that. The questions from me -- and I appreciate you have not provided guidance, but can we sort of use the second half as a bit of a base? And I'm just mindful that you sort of mentioned the 95% revenue visibility. I mean is there anything kind of wrong with that logic, i.e., a lot of project implementation work that comes to an end or something like that in this year that we should be mindful of? And I appreciate the comments you made on the margin as well.

Jules, look, I appreciate you're trying to model the business at the moment now. And look -- and similar to ourselves at the moment now. Look, I'm being as practical as I possibly can, Jules. When you're looking at -- what I'm trying to say is our business is largely unaffected. But what's happening with COVID-19 and these second waves at the moment now, could I make an absolute comment that the discretionary spending of all of our customers are going to maintain the same level of trajectory? We found in the last 6 months, projects which were underway largely did not get interrupted, Jules. But I think if you went to your bosses at the moment now and said you want to spend $150,000 on some new technology, will they be freely writing the check out or they'd be saying put it to hold? That's the way we're thinking. We provide an essential service for our customers. So that's not changing, and so that's highly predictable. Will they be as adventurous with something? I don't know. And I'd rather not comment, and I'd rather be a little on the side of being conservative. And that's why the restructuring of our business probably went to levels we haven't done before and as quick as we possibly can because to us, it was a great opportunity of refreshing the EBITDA margins inside our business, Jules. So I understand your question, and I'm not going to give you the answer.

All right. That is fine. And then just 2 follow-ups. Just on the comment there about the dividend, targeting $0.05. I see in the deck you referenced final. Should we think of the $0.05 as being representative for the interim dividend? Or is that sort of more likely to remain around that $0.03 base? And I just have one follow-up after that.

Look, as I tried to answer that question before, I think it's a little too early to try to understand where we're going to be from interim dividend perspective. But look, I've used the word very deliberately, "target." We'd like to think that we're targeting a $0.05 dividend going forward. But hey, the Board's got to sit there, got to understand where we actually are at the time, as you can appreciate, to do the responsible thing as we look at the opportunities that are before us at that time. So yes, you can look at it in lots of different ways. One is that we would have had more of a special dividend if we weren't prepared to be targeting that underlying dividend. So we do like to think that we'll be seeing an increased return going forward, but it's far too early to tell.

All right. That's helpful. And then just lastly, capitalized development spend, I think it was around about 5% in this result. Is that a reasonable -- it's been 5% for a long time. But is that a reasonable estimate just for next year, looking at the cost base?

Well, I think so. Again, Andrew and I spend a lot of time looking at this. As you know, we spend a lot more money than that 5% on continuing to invest in the products with our customers and so forth. But look, we don't want to be seen to be propping up our results on the basis of throwing a whole lot of capital onto the balance sheet. So we try and maintain it around that 5%. And as Andrew mentioned, the level of scrutiny that goes into how and what we invest in, I've got to say in my career, is second to none. At Hansen, it really is done to ensure that our software, a, meets our customers' needs; b, is really on point as we look to assess what's going to give us the best return going forward.

[Operator Instructions] Your next question comes from Richard Hemming with Under the Radar Report.

I guess it just relates to some of the questions before. With the ongoing EBIT margin, was the boost due to the accelerated integration of Sigma? So do you assume [ 28% ] kind of margins on core? Is that what you guys are saying?

Look, I think that we've had a number of initiatives that have been running over the last 18 months to 2 years in order to look at our margin. Certainly, Sigma is one part of it as we integrate a new business. The -- Hansen's never really bought a business that's been achieving the sort of underlying margins that Hansen itself has. So that's the Hansenisation piece. We bring greater returns to the businesses that we acquire. So that's certainly one element of it. I think the other element of it is, as we look to take further advantage of the development centers in India and Vietnam, we've really started to close in on leveraging those a great deal more. And it's broadly, I think that the numbers -- about 20% of our staff are now in those centers. So it's starting to work its way through into the business. So look, yes, we are saying and we've always said that we're targeting between 25% and 30% EBITDA margins within this business. And I think this year has seen us take some considerable steps in getting back to the upper end of that range. So certainly, our intention is to be up in that 28% to 30% going forward.

Okay. And in relation to the $70 million new business, was that -- are you guys taking share from SAP and Oracle? And is that where the growth is coming from?

Well, I think we certainly come across SAP and Oracle in a competitive sense on a regular basis. And as Andrew mentioned, we certainly punched above our weight where that's concerned because we really bring to our Tier 1 and Tier 2 customers a very strong ability to be able to deliver very positive experiences to their customers and a very, very, if needed, bespoke approach. So Hansen's at a size where we're agile. We're willing to work with our customers to deliver something quite cost effectively. So we really have a strong competitive nature, where all of our competitors are concerned. And we are taking business, of course, from SAP and Oracle. Some of the recent wins particularly have seen us win out over Oracle in particular. But look, generally, there's a bit of competitiveness out there. So we punched above our weight, as I said.

And have you noticed any inroads from like disruptors like Octopus Energy in the case of Origin [ in that ] profile there? Has there been any comment lately?

No. You've got to understand, the energy market is actually served about 500 different versions. Octopus is a -- it's unusual for an energy company to write their own technology, and we wish them success. And Origin, as you know, has invested in them as well. We don't necessarily -- I think you -- we respect everyone as a competitor out there, which keeps us as honest as possible. You'd hate to ever be relaxed. And that -- this market is too big and too diverse. There's no one single play. We're not arrogant enough ever to think that we can actually own the whole world because it won't ever happen because the system we have is all around differentiation. And that is the ability for our customers to build a product, configure a product, to sell a product, which is different to their competitors out there. So you'll never get absolute dominance. And that's why we -- as much as we make lots of new sales, the business which we're picking up, that aggregation of picking up, we've done that. We picked up business in Norway. We picked up business in Sweden. We picked up in Africa. That's our focus. So do I pay any attention more than anyone else there? It's -- but it's not saying, which -- there's no keeping me awake at night worrying about some Octopus.

Certainly [ well, that's fair enough ]. I'm glad you're getting sleep. And in relation to the customer base, when you say you're aggregating mature businesses, can you just explain that?

I've probably done a few slides on aggregating -- aggregation.

There's a lot of aggregation mentioned in there. I just -- there was so much aggregation mentioned, I guess I got aggregated out of understanding what aggregation means.

Well, most people would say they do acquisitions, and they talked about acquiring business...

Yes. I understand that. I understand on that side. I just got a bit confused when you were talking about aggregating the -- is that what you're talking about?

Yes. The aggregation, [ as I said ] the underlying part of our business is aggregating those acquisitions as we do it. We did this for [ 30 years ]. It's okay. No problems at all. That's okay. Well, Richard, thank you so much, for your call. And thanks, everyone, for being on board listening in.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.