Hansen Technologies Limited (HSN) Earnings Call Transcript & Summary

Thank you, Travis, and welcome, everyone, to the Hansen Technologies first Half Financial 2021 results. I'm joined here today with Graeme Taylor, Chief Financial Officer; and Head of our Investor Relations, Malcolm McNab. And they'll join me today in going through the slide presentation we released to the marketplace. Clearly, in the front of it, look, we're very excited about the results. It has been a very strong financial and operational performance. We've had some great strategic wins. We continue to show resilience and growth and a very, very bright future to our company in what has been under a cloud of COVID the year. So let me kick off. Look, any questions, we'll actually do those at the end, and we'll ask you for questions. Certainly, an important notice. There's some explanations in there. So please take time to read those to understand where we're going. Just quickly on the agenda. The plan will be to give an overview and the results highlights. And then we'll get to dividend and outlook. And then followed by questions. So look, just the history of Hansen, and I think it's always important, just to remind people who we are. But we are a global company, which originally was founded back here in Australia back in 1971 and now with about 85% of our revenues overseas. So we're very proud company to have left the shores of Australia. But basically, we provide technology, which we own, serving the gas, electricity, water and communications industries. We develop and implement purpose-built software, which really enables our customers to bring to market new products, services, then build them, et cetera. And in all cases, where we own the IP. We're sitting around about 580-plus customers now in 80 countries. And we largely deal with Tier 1 and Tier 2 customers, which gives us that great resilience part of our business because they are not fledging and ongoing. And the other point is we're very well diversified against regions and verticals with software in 80 countries to have the verticals we've got at the moment now, no customer more than 5%. It just shows we're very, very diversified against currencies, et cetera. So we think we're in a fantastic position. Our mission is to further grow best-in-class core business through aggregating maturing trends to predictable businesses. I suppose everyone's got a mission statement, that's ours. But basically, look -- I want to touch more on probably the growth and the scope of other verticals as our business is one of the other avenues we've got. We've built a business which has a great foundation across the global markets at the moment now. And we're trying to find other verticals, which actually can marry in with what I was explaining is the gas, electricity and water markets we've got at the moment now. Our mission clearly is to drive through that global experience we've actually got. We are very fortunate at the company. And actually, of note we've actually only got 1 expat who works in the company, even though we have people, foreigners working overseas, but we only support 1 expat. So largely, our business in Finland is run by Finnish people. Norway is run by Norwegians. New Zealand by New Zealand. And We're very, very proud that the Hansen playbook works out very, very well for people to follow the Hansenisation program around the world. Hansenisation of the aggregated business has been really important to us. If we dart back in mind, nearly 30 years of being in Hansen, where we've done probably 30 or 40 acquisitions. We have a playbook, which we call Hansenisation, it's the way in which we measure, we run, we report on our organization. And we know, hence, when we do acquisitions, we can quickly bring that Hansenisation. And we can actually teach people very quickly the way to run their business. Hence, nearly so every business we bought, we've actually taken on to higher opportunities and certainly make a lot more money than what they were doing in the past. And probably the other thing is we're highly disciplined in our operation. Largely, that's been that being patient to find the right opportunities, the best for our shareholders and stakeholders inside the business. Just moving to the key headlines. Look, great to see the revenues up. We've -- in answering to a lot of our shareholders to talk in constant currency. Because we are such a global organization, the number of currencies we deal with, the -- I think dealing with the constant currency allows people to truly understand where our growth is coming from. And just a bit of a backdrop to that. Whilst we're up 2%, you will recall in previous presentations, there was some business we chose not to renew, which really had a disproportionate amount of call center activities in it. And if in fact, we were not -- that business, if we added it back in, actually, our growth is close to 6% going forward. So we think it's been a fantastic year on a constant currency basis. EBITDA, the true measurement of Hansen, we're not a speculative stock. This is a mature organization and which makes money. And our EBITDA, up 44% on the corresponding period. And our NPATA up 77% to $31.6 million. Clearly, the stickiness of our customers is what's actually enabled this part of our business. And as we always try to outline that 97% of all of our revenues come from where we own the software. And also very proud that we have great visibility, 12 months out ahead, of where our business is going to, which is always around that 95% of visible from where our revenues are coming from. I know that Graeme will talk a bit more in detail on some of the results. But once again, just so proud of the results in -- against the COVID-19 backdrop for a lot of organizations where we've been able to navigate that going through. Continue on the headlines. Underlying earnings per share, up 77%. I think the main thing, a lot of shareholders on the call now, a lot of people which follow Hansen is because we are very strong cash-generative organization. Significant reduction of debt. So meaning our net debt down to 95%, a reduction of $20 million, is a great sign. And once again, I think Graeme, you'll probably wish to talk more on to that. And important, increasing our dividend to $0.05. This is our shareholders' money. And if we've got better uses of the money and we think paying down some debt and working capital, we should be returning it. And so we're happy to increase the dividend for our shareholders. Graeme would you like to take on talking about the first half and some of the details, please?

Yes, thanks. And on behalf of the Board and Andrew and myself, there's a lot of people that work very, very hard to deliver these results. We're really very fortunate to have a wonderful team of people across the globe that have made this during the first half, within living rooms and wherever else, to make sure our customers have been well serviced through the period. So it's a real credit to everyone out there, the delivery teams and all the people working very, very hard to ensure this outcome. So first of all, let me extend congratulations to the Hansen team. As we look at the results, revenue, as Andrew mentioned before, it's great to see some revenue growth when you look at the position for the business. And look, it is in difficult terms, but some of these wins have been quite, quite significant for us. We start to understand the business and understand that revenues are up 1.2% on a constant currency basis. We look at our EPS growth, and we understand that, that's also translated through the business because we're starting to see some very good NPAT savings in the sense that we've got our interest and our debt levels down. We're in lower positions of margin on our interest. And we're seeing those translate into some real savings for us. As Andrew mentioned before, dividends are up $0.05. It is one of those things we were able to return some cash to shareholders because of our strong growth in our cash flows. And we really like to reward shareholders wherever we possibly can. So look, looking back to the underlying EBITDA and understanding where we are there. We have had some margin improvement within our business. And that's really come from that previous investment in our low-cost development centers, savings within our integration within the Sigma business and really turning to -- back to that strong productivity that we've been able to maintain through this first half of 2021. It's really great to see that in such a difficult COVID environment that, that productivity has been maintained very, very well. As I mentioned before, the strong paydown of debt really does turn this business up. We've got great support from our banks. We're seeing profitability across the globe, with profit here in Australia, all throughout the U.S. and Europe, which has led to a tax rate returning to that typical 24% that we projected at of 30th of June 2020. We expect to see a mixed bag with tax rates. It's a little bit of an uncertain position with the U.S. and so forth going forward. But still, 24% across the business is probably where we expect our tax rates to remain. Okay. Talking a little bit more to the debt position, just very, very quickly. Look, with such a wonderful cash flow position that the business finds itself in, particularly, again, with COVID-19, we have not experienced any issues with working capital or payment from our customers. We've continued to see great cash flows in the business. In fact, it's great to be able to get to this typical position at the half year, where in past years, we've perhaps seen a little bit of a buildup in our working capital beyond the current levels. And we've been able to manage the business very, very strongly to ensure that, that hasn't happened. And the conversion to cash has been very good. That's allowed us to pay down debt and really brought to play the fact that we have some strong available liquidity to service the business going forward and a really strong capital structure to take into the second half. We really want to emphasize this point. Hansen has an unbelievable position on its fiscal strength. The cash flows, the strong profitability is something that's not just a flash in the pan. It's been part of Hansen's business for many, many years and continues to mean that Hansen is in a really good position, not requiring equity injection to get through this difficult period and in fact, really trading incredibly strongly through the period. Look, moving and talking specifically to cash flow. Many during the pandemic have looked to raise equity as a means of securing their future. Hansen hasn't had to do that. Our strong business fundamentals have continued to secure Hansen's future. And I think it's really important as you work through that cash flow, and I don't propose to go through line by line, that the really strong business fundamentals come out there. Good working capital management. Cash invested sensibly in product development. Really strong physical cash flow generation, allowing us to service our debt with these and, in fact, continue to strengthen our position with our banks. And of course, return some of that cash to shareholders as we look to our future and the cash requirements the business will have. So look, I'll expand a little bit further later on debt, but I'll take this opportunity now to hand over to Malcolm, who will go through and have a bit of a discussion on the key achievements in the half.

Thanks, Graeme. Something we've shown both during this latest global crisis, but even earlier in the global financial crisis, is resilience of our business, creating highly predictable revenues. Now this is, as mentioned earlier, this is driven in large part by our long-term customer relationships, with most of our customer relationships being greater than 10 years. So not only do we have a base of business resilience to protect us on the downside, we've also seen robust growth through this pandemic. Because I think it's fair to say all of this is possible through our sector, thought leadership and expertise with an executive team with over 100 years of expertise and experience in communications and IT and management, which is all resulting in low customer losses and significant new strategic customer wins, which we'll talk about shortly. Looking more broadly, we see 3 key achievements in the first half that we think is worth bringing the market's attention to. Firstly, continued significant customer wins, and this is so important that we'll talk about this in more detail on the next slide. Secondly, significant technology and organizational investment. Now this has been through, as mentioned earlier, our development centers. So there's been significant recruitment of new developers and we're now betting on our new development centers to support our future growth. Secondly, cloud relevance for our products. So all of our products are available on-prem, SaaS solution, public cloud are Hansen provided cloud, which gives ultimate choice for our customers. As we've mentioned earlier, we have a head of strategic sales, who's driving key customer relationship development and sales effort to grow that cash-generative core. And as we've also mentioned earlier, an M&A team who is focused on searching and screening for all relevant aggregation opportunities. And we'll talk about that in more detail in later slides as well. And then finally, the key achievement in H1 '21 is the sort of accelerated increase in our profitability. We touched on this earlier, but we're really proud of our continued positive momentum in EBITDA margins, which has been driven by the continued rationalization of the company's cost base. So I'll now hand over to Andrew to discuss our recent wins and impact on organic growth.

Thank you, Malcolm. I think it's probably just worth touching on, and we've actually articulated these in slides anyway, is that the categories where our strategic wins have actually been coming from. There's no doubt the worldwide adoption of 5G is going to be a major game changer. And I understand most telcos are still working out their commercialization of what they're doing. But it is leading to most telcos to look at as they're rolling out 5G to understand and look at their technology stack and how they're going to support products and services, the Internet of Things, which they've not actually been doing up until now. And I suppose, we are looking forward to closing some significant deals in the future. We're certainly partnering with a lot of our customers on how they're solving it now. I suppose of note, we don't normally go to lock details on our customers, but the DISH deal, a very significant player in the U.S. market, and they had a ground-up approach. So they were looking for the best or brand-new technology to support their business going forward. And that win was really quite significant for us, given the fact there's a lot of competition out there, but to be chosen the best-in-breed a number of times as we are now, we're very, very happy with at the moment now. Certainly, smart energy. Smart energy is certainly the adoption of new ways, power and how we're going to be consuming it. And wins like with Western Power and the adoption of smart energy is going to keep on changing things. Regulation adoption. This is a constant. There's different countries around the world look to have macro changes into their businesses and how they're going to be dealing with regulation. We've been involved in regulatory changes in the Scandic regions and the Australian marketplace opens up, et cetera. And also it also brings under focus for those who look at the overseas market and what happens in Texas, which the way the regulations have been running in Texas at the moment and there probably question since Texas disconnected themselves from the national grid sometime. So they all become opportunities for Hansen because of the way our system is actually working with people. And then you get the renewables. Now renewables and smart energy, a little bit combined. But solar power, we see Victoria's just announced, probably with the biggest lithium battery storage facility in the world going at the moment now. And once again, for Hansen, they just become more chargeable events, the type of energy and the way you're consuming or putting it back into the grid. So we have extreme confidence the way the organic part of our business is continue to grow. But more importantly, how we keep on working with our customers and not giving them a reason to think to go somewhere else, that we're able to solve their future today. M&A. Look, I know M&A is an important one for everyone in the company, those have followed Hansen. We are not -- never been a double or triple digit growth organization. We've had an organic company growing at 3% to 5%. But some of our growth does come from acquisitions clearly, which has been very good. So we have got a dedicated M&A team. It's interesting with COVID, deal flow has not necessarily slowed down. And so we have been able to, from afar, start to assess some of the opportunities being presented to us. And clearly, as things get closer, and we will be making announcements of doing it, but I just wanted to give some a bit more color to our M&A team and what they're actually doing. Clearly, it is a very structured approach and always has been highly disciplined. It was part of my career before joining Hansen. So we've never really strayed too far from what works from us. I'm not a career CEO, guys. I'm an owner-operator sort of thing. So you've got to eat what you kill. So I have a lot of focus on making sure the businesses which we acquire and we aggregate the Hansen make perfect sense. But we do have always quite specific criteria. We do want to be in robust and mission-critical verticals. We like to be close to the cash where the business is operating, whether that's actually generating the products or the services or the billing, that's our area we like to be. We don't like to get down really too far into the network, et cetera. We want to own IP. We think it's fundamental for a company like Hansen to enjoy 10-plus year relationships with customers. To own an IP gives us a clear road map to the investment and our investment approach to all of our products. I think it's really important. So ownership of IP is fundamental to us. We are a global company. So regional expansion and leverage of our business. We have legal teams, finance teams, admin, IT, sales, marketing spread around the globe. That is the foundation we go to. So as we bring a business on board, we get some of those efficiencies from those systems and processes we've built. So hence, we know coming out of COVID, the opportunities exist. We do have a global team able to execute these transactions. We do look for complementary applications. We are looking for that brother sister to what we do, not necessarily second, third or fourth cousin. Other verticals. Other verticals has always been an interest to us, looking at the fundamentals of our business, and we have explored a number of them, because we believe that foundation stone I talk about in Hansen that we could look at another vertical to take use of those systems and process we've got. So we are looking at transaction-based opportunities or subscription-based opportunities, because we're so used to dealing at such large volumes. And to do with volumes and complexity is good for us because we think we can actually also provide some thought leadership to those parts of the areas. And we do like dealing with mature and predictable Tier 1 and Tier 2 customer bases. And Tier 3, the 4, the start-up organization, you are going to invest a lot of money in those companies but not to see them actually survive in the longer term. So we've always done that. As far as the structured approach in identifying, you'd understand that we're running a database of about 400 companies which we actually know and we actually follow. We do create really basically that funnel. And we are looking at our competitors. We're looking an evolution. We're looking at technology, the whole time. And therefore, it comes down to the basic fundamentals to us is looking for the owner-operator business. We do love a potential carve-out of a large organization, which makes a lot of sense for us. And also when there's owned by private equity, and there's a bit of movement in private equity firms, certainly mature businesses like ours. We're seeing a correction in the tech and probably should happen anyway. But basically, Hansen is not part of it and Hansen makes cash. And I think some of those private equity companies, as they start to see their businesses and where their trajectory is, will provide lots of opportunities. So as I said, we -- I think I've always used the word, highly disciplined, in our approach to acquisitions. And I've got an extremely talented, dedicated team of people who have been working for a long time which we're able to execute those plans. So Graeme, do you want to touch on the dividends, please?

Sure. Thanks, Andrew. Capital management more broadly. I think really, we're in a position where not a lot's changed from a policy standpoint with respect to capital management. Clearly, the Board and the senior executive team look at how capital is utilized and what we do within the business to ensure that we're well placed and the business is growing strongly into the future. As mentioned before, we continue to pay down debt. From a capital management point of view, that's really resetting the balance sheet and allowing us to use debt for our future anticipated growth. I think the thing I'd like to really point out at this juncture is that when you're considering capital management, you've got to put it into the context of a proven management team and Board with a history of strong fiscal responsibility, and we're continuing down that path. Our strong cash flow generation really has now got us in a position where we're seeing unprecedented support from our banking consortium. There's no question about what level of debt we can raise. People are out there offering us money all the time. And certainly, at the record low interest rates that we're seeing in the market at the moment, debt certainly seems to be the way we go going forward. So we're really very well placed to continue with the growth of our business. Healthy levels of debt between 3% and 3.5% is something that Hansen can very easily service. And in fact, we are looking at capital management around acquisitions specifically. Different acquisitions will require a different capital approach possibly. And so that flexibility is really, really important. And the Board keeps considering these things as we look to the future. The dividend. Look, we've mentioned a number of times before, $0.05 appears to be the right level at the moment, returning higher levels of cash than we had in the past, but also responsibly balancing that between what we expect to be doing some time in the future. So really capital management remains the same. But look, I have to say from a CFO's perspective, we're very, very well placed to use our capital to continue the growth of our business. Okay. Andrew, back to you for the outlook.

Yes, they give me the good slides to talk to. So look, the outlook. I think by the tone of this and the tone over the last number of years, we're very extremely confident about the future of our business. It's a great business, it's a predictable business and we love what we actually do. It's on that basis. We just want to update our guidance. This is all under market conditions around the COVID-19, but we want to update our guidance now to revenue of $295 million to $300 million constant currency basis. And probably more importantly, the underlying margin, as Graeme has touched on, our EBITDA margin, in the higher echelons of what we've set before. But Graeme mentioned, we truly are seeing the benefits of some of that infrastructure investment we've actually made, eliminating some of that lower-margin business priming also, which we've eradicated from, et cetera. The Sigma contribution, our management. So it's really nice to see that -- there will be some, I think, some costs will come back into the organization. But I think everyone would know now, we've successfully run the business now with 12 months remotely. And as Graeme touched on, the team of people working from their homes and their home offices or their car, et cetera, have done a brilliant job, but travel might come back into it, but probably never at the same levels. I noticed myself, closing deals with executives around the world, it's just so commonplace now. Whereas once upon a time, it would be over a meal. It would be face-to-face. But it's now acceptable doing it from my study to their study in their homes around the world. So whilst some costs will come into the business, but we're very, very happy the way we see the structure of our business for the medium term. The other thing which we wanted to give highlights of the business, we've now talked about the future of our business. But to -- there's been lots of questions from our investment community about our long-term financial questions, which we just wanted to really probably talk about. So we have as a Board and the executive management has signed up now to the target of 2025 year of $500 million. And we're not seeing that as ambitious at all, because if you look at the last 5 years, our CAGR has been at 23%. So if you map in our organic growth and that we're talking about growing at half the pace we've been doing over the last 5 years to hit a target of $500 million. And that's supported by organic growth, that's supported by our approach to M&A. But I think it's just fair that the systems and the processes are all in place now to undertake that. And as I said, it's a very conservative approach since it's less than half of what we've been doing in the last 5 years. So I hope that gives some confidence to the investors on the call, investors listening to this, of why you're investing in Hansen and coming on the journey with us. It's very, very exciting ahead of us.

Yes. Just before handing back to...

I'll probably hang up, you'd like to have a chat, Malcolm.

Look, as a relatively new member of the team, it has been hugely impressive to see what Hansen delivers, whether it's a strong financial performance, including resilience and growth, the best-of-breed technology, the strategically significant customer wins sort of really underpinning that organic growth story. The structured team processed and really significant opportunities for acquisitive growth. And finally, most significantly and Andrew has just touched on, the visibility and strong confidence in our long-term growth and profitability outlook is really making an exciting time at the moment. So I'll hand back over to Andrew to close the presentation before some Q&A.

Malcolm, thank you. And I hope everyone's enjoyed the fact we've mixed up with a few more people chatting rather than me just boring everyone the whole time. Look, it's probably been a great half for the company, and there's no doubt about that. We're very, very happy for everyone being involved and our appreciation to all the stakeholders in the business, that being the shareholders with our staff, et cetera in the journey we've gone. We've been having some strategic wins and -- which will drive some strong organic growth for the company which we're looking forward to with some of our products. The M&A approach, we're very confident on our approach to M&A going forward. At the moment, or hence, happy to put out what our internal targets are to our shareholder base. The second half is looking strong, and we're very confident that we will comfortably meet or exceed the previous guidance going forward. And I think going back to that point, that confidence in the long-term outlook of our business in the markets which we support, we are issuing that $500 million in revenues and how we're going to grow there is all well thought out and planned, and we hope that everyone appreciates the candidness and the openness in this presentation today. So that -- now that concludes what I've got to say. If there is by chance, any questions, I'd be happy to take those questions. Travis, you'd like to take the questions for me, please?

[Operator Instructions] The first question comes from Garry Sherriff from RBC.

Andrew, Graeme, Malcolm. Just a few questions from me. Firstly, I just wanted to isolate the like-for-like sales and EBITDA growth, Andrew, because, you did mention that if you excluded that call center contract that you guys exited, the revenue growth would have been closer to 6%. Just seeing if you can also maybe tell us what EBITDA contribution was last year. Was that loss-making? Just trying to get a better sense of isolating the like-for-like sales growth and speak that out?

Good question, Garry. But it was not -- it was not a lost leading part, but was it certainly the lower echelons of acceptable EBITDA margin of the business. So you're only talking a number of millions of dollars. It would not have had a material change when you look at the overall profitability of the company, and we haven't really disclosed it. But it's not loss leading, Garry, but not high-margin business. Because as you imagine, call center business is fickle and low margin.

Yes. Okay. No trouble. I mean you have won a bunch of new contracts, which is great. Just trying to get a sense on how we should phase that revenue growth over the next 12 months. And secondly, I wanted to check around, you mentioned low customer losses. Did you give us anything on churn or anything a bit more specific? I'm just trying to get a sense on, yes, I understand revenue was flat generally. But if you ex out that call center contract, it's obviously better. But I'm just trying to get a sense of the back book growth and also churn, just to try and reconcile what's going on behind the scene.

Yes. Churn is -- has always been very low, it's sub 1%. I'm not sure what it was exactly, a bit more than a handful maybe of customers. And that case is often due to emerging -- there's a bit of merging in some of our customer base in the Scandic at the moment now. But it's not a material change to our business. As far as, Garry, the revenues from our customers, as you always know, we have a mixed blend. Now we discussed this with you, but for everyone on the call, the way we price our customers, so we get normally a license fee. And the license fee is normally aimed at the size of the business and how many customers or how many meters they're actually doing. And that license fee, we try and instinctively normally to turn that into annuity stream. So that normally does not a new customer coming on board does not have a major material change into our business. We have implementation. The implementation of our software, the average in-store probably is close to 12 months to install the software. And so we would have a flow of revenues coming through, which is a bit disproportionate for a 12-month period with the implementation. But in some cases, because the Hansen playbook is always try to marry our pricing in with customers and how it works for them, in some cases, we elect to actually almost fund it for them and put that part of the annuity stream rather than some of the funds upfront. Then you've got the normal maintenance to support. Once the system goes live, Garry, we then have people paying us support and maintenance for the application. Then the last bucket is the professional services. And the professional services could be because Hansen provides all things. It can be on-premises. They're using their own hardware. It could be they're in our private cloud or they could be in the public cloud or could be a SaaS offering. And so those professional services are often built around those applications and how they're actually done. But all in all, Garry, there's no -- all customers if -- probably just aggregates out, hence, to that sort of growth we're getting into the organization. But we are mindful. We do have some customers going which have a different balance sheet requirement, might want to give us more money upfront. And others want to have an operational one. So there's no single rule to the way Hansen does it. But that's by the nature of our industry. I certainly look at some companies which just have a much more -- a cleaner pricing plan. But for ours, we like that flexibility we build into it and that flexibility which we offer our customers.

Yes. Okay. Got you. Just talking about your 2025 $500 million target. I mean your historical growth rate organically looks like it's well under 5%. So the driver is going to be M&A. Love to hear a bit more about where you think that those verticals will really be focused on. And maybe just remind us around your, I guess, multiples criteria from an EBITDA perspective. I know seasonally, it's done I think, at about 8, 9x historical EBITDA. If you could give us some more color on that, that would be great.

Yes. Look, we're not really highlighting any specific. There's no doubt during COVID, there's probably been a little bit more focus on what we're looking for of where in-country we have adequate support for our ambitions. The idea of going to some of the regions where we don't have good executive management for finance or IT teams, et cetera. So we would probably -- or you could look to more in our established markets for that further consolidation what we're going. Multiples, so that's always a debated item, to tell you the truth. Look, you wouldn't blame me for saying I think that Hansen has been undervalued in the marketplace for a company with its history and profitability and Class A general. I don't necessarily understand our multiple. That is problematic a little bit for us, Garry, because buying good businesses, it's hard to buy good business. So there's a bit of competition because private equity are able to pay a lot more than that at the moment now. But we're hoping that those assets. So the multiple always, we're really aiming more for an earnings accretive asset than anything else. In some cases, the predictability of their revenues or the synergistic nature of the revenue will pay more versus in the past, we've paid as low as 3x because it's not as predictable or it's more riskier business. So I think you'd probably say average is 8 or 9. The advantage has always been and even if you went back to the Sigma business, which I think we bought at probably a 10 or 11x. But based on the earnings we're getting out of the business now, look how earnings accretive it is. So no golden rule. But we have a lot of focus in those criteria I've already spoken to. It's all about owning IP, the criteria. But we also -- a lot of the work we do when looking at an acquisition, for everyone on the call, is not really historically looking at the business. When we're buying a business we intimately know, it means that we know how to model the financials of the business. And in fact, we spend most of our time in due diligence modeling what we're going to do in the first 90 days and how our business would actually look in our ownership and how much money we can make out of the business. And hence, we do turn the business around very quickly.

Got you. Last two questions quickly. Sorry, buying from private equity ownership, you mentioned on Slide 15 in your deck. I guess investors are typically cautious around PE owners selling assets to listed players simply because most of the cost out has been done already. What gives you that confidence to purchase from PE? And I guess the second question, cost out from those development centers. Is that largely all factored in now? Should we expect any more margin improvement from those initiatives from here?

Yes. Private equity Garry, are always a bit tricky to buy because they do run a campaign. An owner of the business or even a conglomerate, their criteria is not only price, but who's going to own the business. So they always spend a lot more time knowing about that culture, keeping the management, what we're going to do with the software, et cetera. Private equity is just price-based, but that's right met on price based as well. So why to be confidence in private equity because we are still the natural owner of some of these assets. And that's the point about it. It's rather than actually handballing off to another private equity firm in this sort of space. We are approached by private equity at the moment now. Clearly, they think the valuations, they look at our valuation, and that should not want more for their assets, but it's an ongoing discussion. But we look at all of them. As far as Graeme might have talked to, but I think the -- we will continue to wash through the efficiencies. We've been super impressed. And just kind of remind everyone, the -- whilst we talk about the low-cost development centers, it's not about low cost to us, much as availability of staff. The Indian marketplace has millions of IT graduates. It's a massive, massive market, bigger than any other market we are in the world. And so therefore, when we're hiring people out there, the caliber and the depth of the people applying for jobs is second to none. And whilst, yes, it is a lower cost there, but there's a lot of pressure in India at the moment now. So we're not the only one to have woken up to availability of great talented staff, and there is wage pushes. But it's coming off a fair run-up at the moment now. So I would -- demonstrable changes know that we are well and truly going to continue to focus on using some of those development centers going forward into our business because of the success and the trajectory of the projects will receive from it. It's very -- we're very, very happy with it.

I think there's only 2 things I'd add very quickly, Garry. Sigma, as you know, we bought from private equity. And I think there's no doubt that we've been able to show how we bring a business out of that environment Hansenise it and generate further growth and certainly greater margins. There's no doubt that we have a track record in doing that. And I think from a margin point of view, look, margin is always subject to circumstances at the time. We've got critical mass now in these centers. We'll continue to keep looking and investing. But really, the fundamental in Hansen, we have great customer relationships. And so we always have some core people in the country, and holding their hands, giving them the thought leadership, making sure that we're remaining relevant. So it is a balance. And we see that balance as being extremely important.

It's a very good point. We're never going to be faceless in front of our customers. Correct.