Hansen Technologies Limited (HSN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Hansen Technologies Limited First Half '22 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Hansen, CEO. Please go ahead.

Thank you very much, and welcome, everyone, to the call today, which no doubt is probably a busy time in the reporting season. I hope everyone's had a chance now to digest the uploads what we've got, and I'm joined here with Graeme Taylor and -- our CFO, and Graeme and I will walk through our results. What I've got to first tell you guys, it's a great 6 months, and we're very, very excited to be able to once again present another record year for the business and in amongst what has been still some challenging conditions with COVID around the world, travel still being restricted a lot of the place, customers not willing to have us come on site, et cetera. But once again, we're very, very happy. So clearly, of note is our revenues at just shy of $149 million, a 4.7% increase up; great to see that EBITDA, once again, and Graeme will go into a little bit more detail, which continues to go well, whilst we're having some of those costs coming back into our business, but maintain a high level of margin, which is our goal going forward; net profit after tax, $31.8 million, up 7.4%. I think that these numbers speak for themselves in these sort of times. I'd point out once again, our revenue derived from our own IP, that we're not resellers, et cetera. So it's important to note that our revenues all come from things which Hansen own because we're distributing our own products, and with a customer churn of less than 2%. So Hansen, for 30-odd years now, has been very, very fortunate to build out a software deck, which people want and don't want to leave us from going forward. Earnings per share up to $0.159 a 6.7% increase, which is great. Dividends, I think the Board always takes a view on the dividend, et cetera. And in this case, we've given a %$0.05 dividend and $0.02 dividend. Once again, the cash is our shareholders' cash in the event, which gives us plenty of chance for our working capital by paying down debt, et cetera, and looking for opportunities to acquire. We've always said it's your money, so increased the dividend by a couple of cents. And the net debt now down to $41 million, which just continues to show the strength of this company's cash generation. I think, as always, you'll look at the EBITDA and Graeme, he'll go shortly through just what we're doing with our cash, but this is a real cash-generative business, which we're very, very proud about. A bit of a slide there, which we continue to point to only because one day we do envisage, we will find another lane to swim in. But basically, the geographics of our business is EMEA's just over 50% of our business, with APAC and EMEA making up the full 100%. And the verticals is almost line-ball now between what is the telecommunications sector and the energy sector. And across that, over 550 all Tier 1 or Tier 2 customers; we don't have many small customers at all. And we have software operating in some 80 countries around the world. So I know we've made those points before. But in times of uncertainty, it's also good probably to reinforce some of those things there. Graeme, I might ask you to drop in a little bit more detail on the results, please.

Thank you, Andrew. Look, great results for the half and first talking to revenue. I think it's important to note that this has been a period where we've been busy delivering to some new customers, as well as executing on various initiatives from within the existing customer base. This really is quite a strong trend within the Hansen business as our -- as we partner our customers through their digital journey. So revenues have gone from, in the same corresponding period, $142.2 million, up to $148.9 million. In that, we've seen some $5 million worth of license revenue. That's an increase on the prior period by that amount, which continues to drive the underlying margins and EBITDA. Staff retention and recruitment initiatives are starting to bring some sort of stability into our numbers, although it continues to be a little bit of a risk as we see that global mass resignation impacting industries across the globe. But a great EBITDA result for the period, up by 4% to $54.2 million. The other point as we look further down, underlying NPATA, profits have moved into different tax jurisdictions. So we've seen the APAC regions see a little bit more activity, which, together with utilization of tax losses, means that we've seen a slightly higher underlying tax rate to 22.7%. But despite -- with cost control and so on flowing through, we're seeing our net profit increased to 31.8% for the period. Continuing on to the next slide. Adjusted EPSa, I think Andrew talked to that a little bit. Obviously, with the improved margins, we're seeing that up some 7%, as I said, driven really by a lot of additional license revenue, some $5 million when you look at a half-on-half comparison. And of course, license revenues, as we know, are pretty margin rich for our business driving EPSa. Dividends per share. Look, Andrew mentioned this in his opening address, handsome strong business fundamentals means that profit converts to quite a high level of cash. Our strong cash flows have allowed for both a distribution to our shareholders whilst maintaining all of our abilities to execute on our future initiatives. So it's great to be able to return some cash to our shareholders as we move forward into a more sustainable position. Finally, net debt, well, what a great story here. Net debt position has reduced from $153 million back in the first half of '20 to now some $41.5 million. We could go a long way to find a business that generates the sort of cash to allow that sort of retiring of debt. Look, I think that really does put us in a strong position as we look to move forward with a great balance sheet. And also cash that allows us to fund future debt as we expect interest rates will increase a little bit into the future. Finally, Slide 9. We've broken up there the underlying cash for the business. Gross cash flows represent some 93% of our reported EBITDA, which shows really strong ability for this business to keep converting profit to cash, which is one of our really strong business fundamentals that underpins the Hansen business. We simply don't believe in profitless prosperity and certainly generating that cash, as I mentioned before, allows us to continue our investment in our products to planned levels, pay our shareholders some dividends and, of course, continue to reset that balance sheet as we look for future investment opportunities. Andrew, over to you.

Yes. Look, I'll just take a bit of time just to outline what are the key themes of our business. Once again, we're sitting on top of fantastic results, but it's probably always worthwhile understanding below that. There's no doubt that Hansen is a very strong business, which has impeccable probably financial performance over such a long period of time in what has been a challenging economic backdrop. It's not just challenging so much, but it just is -- I don't know, people get deflected or cross or think of other things to think about and COVID is such a big part of the conversation. We've proven cost control. I think that's one of the things which we'd like to think, and no, I apologize, guys, we're not some double-digit company that doesn't make money. Unfortunately, the focus of Hansen has always been profit and cash generation, et cetera, and cost control is at the very heart of our business. And also probably currency hedge and a lot of you would have heard this before, we try to match our costs where we are sitting where our expenses are. So we tend to have this nice hedge inside of our business. So we're not really moving currencies around the place. And then it's just got the additional which is that nice global spread of costs in our business. So in other words, we don't really have a single country or region or [ custom all ] costs, which could cause us great harm or bring us down. Historically, we've always spoken about our EBITDA being margins. And I think the history of like some 20 years has been sitting between 20% and 30%. There's no doubt that our margins have improved and some of that has been because some of our expenses aren't in the business. Some have happened because some of the investment we've actually made in our systems are paying through at the moment now. But where we sit at the moment now, we believe ongoing, our margins will exceed 30% going forward. Now we can always have changes to that. But we just think the way we're running our business at the moment, now we should be able to get that. Long-term relationships with customers, such a small churn of customers, it's just fantastic to run a business where you know where your revenues are coming from. And also the significant new business expansions and upgrades we get from existing customers. So it's not about just having existing customers; these customers are undertaking upgrades and getting refreshed to technology all the time. So it's not as though it's aging technology. It's actually very, very fresh technology, which really goes to just how smart probably our teams are about investing in R&D going forward. And that whole high customer entrenchment is making also additional sales into our customer. I'll touch on in a moment now about that, whereas, they take 1 lot of product from us, and they look to us too for further solutions. We are -- continue to have some good strategic customer wins, and we'd like to think that will continue going forward and look for more announcements to be coming out on top of our organic growth. We do win a lot from also regulatory changes. Once again, our customers look very much to Hansen to help them navigate industry change, et cetera. And some of those industry changes, we've just done a big industry change in Finland. Well, that was announced 3 years ago. And 20 or 30 customers in Finland, which need to deal with brand-new market changes and to work with our customers so they can hit that on time without any delay and on budget is a great sign of the strength of character of our staff along the way. And third, that is the digital transformation, which is happening at the moment now, all through 5G and smart energy, renewables that we are at the forefront of where our customers are going, and they look to us to help them take them down that journey. Look, there's a lot of talk sometimes about technology. You've got to be SaaS; you've got to be cloud. We have a much more open philosophy around that. Having so many customers in so many areas, we have customers who very much believe in on-premises. They want the application run in their own site. But we also have people which do want as a SaaS and want to be paying as a service. We have people who want to be in our own cloud or in a public cloud. All of our products, we like to support across all those disciplines. We don't have a single mindset, which should be one versus the other because we know that we don't want to just have a single product and all companies have to; we believe that all customers must have that flexibility. And I think that's why that very open to innovation is working so well with our customers going forward. And we do have a lot which are transitioning to cloud, et cetera. But just as many go to cloud, we've got just as many also want to stay on premises, et cetera, as we're going forward. So maybe really what is the -- those themes. A little bit in here, one of the deck you've got there to read, which is just really part of that customer momentum. And I've spoiled little bit, but that cloud native, which is very important, which is the next step up from cloud if you go cloud native, and the people like DISH and Telefónica and Virgin, which just have -- aspirationally driving towards that cloud-native transformation. Modular product, the days where these were great big enterprise assets are no longer applicable anymore. People are looking to buy modules. So our applications now are made up of probably about 12 individual modules. So we don't need to win all. And we're also happy with customers who might want to take 1 specific module, which is the latest technology both and keeping some of their older software, their heritage software going forward. A lot more around service innovation and enablement. This is with companies now looking to sell more than their original discipline with 5G or even in energy markets now, your Internet of Things and third-party services. So there's a lot more now working with customers who go away from their original discipline to look to sell more than what they're selling before and people like what we're doing for DISH and Verizon, Vodafone as a sign of that. And also energy transition to solar, some big investments being made in and it's all in the press about AGL and the people looking to take that out. It's that similar sort of thing is looking to transition now from old ways into solar and other renewable energy sources and Hansen is right at the start of all that. So I think where we sit at the moment now, we've got applications which is always important to us that our existing customers want, and new customers who want to come and join the party as well going forward. I think on capital management, it's probably -- Graeme, do you want to give you something to talk?

Sure. Look, capital management, I think we've been -- the message here has been a pretty consistent one as we look to return to shareholders cash where we have no immediate need for it. I think that as I mentioned before, quite a powerful story as the company has been able to pay down debt over the period. And so, as a result, with the cash that we've got on hand, the Board's chosen to pay not only a 5% dividend, but also a special dividend this period of an additional $0.02. That dividend will be franked to 50%. And I think this is quite a strong payout ratio. It's something representing around 60% of the profit over the period. So of course, Hansen is in a fairly unique position and our position going forward from a capital management policy is that we'll continue to return money to shareholders where we don't have an immediate need for it. Having said that, I think just a little bit of color around typically what Hansen does with its cash. The balance sheet is very strongly reset, and we continue to be very, very well supported by our bankers as we continue our search for that next accretive acquisition. Great to see, as the world slowly is opening up, that we're seeing some good assets come to the market. They -- there's certainly people interested to sell the business. There's lots of opportunities out there. And look, I take this opportunity to reiterate, we're quite comfortable and confident that we were looking to achieve $500 million turnover by 2025. That still continues to be the target that we've set. But look, this is a very disciplined process that Hansen runs. We've got a great business with strong business fundamentals. And so we're not going to just go out there and buy something that flies in the face of what Hansen has done over many, many years. So we continue to look for the right opportunity. And should it come, or should I say when it comes, I think we're in a unique position with our strong cash flows to service debt and to continue to service debt in an environment where interest rates are possibly slowly starting to increase. And so from my point of view, I think that fundamental that drives Hansen is quite a strong one that we're in a position to execute on, Andrew, as we move forward.

Thanks, Graeme. So look, in conclusion, guys, we understand. We've -- we're all looking at the marketplace. The global markets have uncertain times over these last few months. I'd like to think your interest in Hansen or your investment in Hansen is one because we offer stability. We actually make money, which converts to cash and not all companies actually do that. There's no smoke and mirrors in this handsome business. And for those who have been on the journey, we've appreciated your support. But we'd like to think that we do provide that stability going forward to all of you. From a customer point of view, yes, our customers' average tenure is like 10 years. It's just amazing that in a technology world that -- where we can continue to refresh that relationship with our customers and relationship with their technology they're using. You only get that because you've got what they want, but also a high customer satisfaction because the customers are renewing and staying with us. And look, often guys, this is going to the marketplace. They're going out to tender. They're seeing what else is in the marketplace and then to win again is just a further chime. And that very low churn, which we're dealing with, we're rather excited about. I did note back at the AGM, and this is probably an issue with a lot of companies have been talking about the great resignation, and we're suffering across all industries. It doesn't -- it's not about IT. It doesn't matter if you're a teacher, you're a doctor, you're even in the financial services. Our churn has waned a little bit now. We've counted a number of programs at the moment to slow down that churn of staff, and that's really working well for us at the moment now. We have taken a view. It's not probably one I want to share with everyone, but some of the actions we've taken have worked well for us. But this is all about supporting safe and productive home or office for people, whichever is the best for them. Flexible working conditions and we've got a whole bunch of plans around the transition of staff taking forward. And also, the other thing we're doing now is we -- and I would have -- I spoke about at the AGM, is just making -- onboarding people, and that's about getting them on board and being as productive quicker than what we were in the past. We are a profitable company, guys, and these records show it. The margin improvement, we've already touched on, continues and our long-term outlook. Now we do know the long-term outlook and what Graeme touched on earlier is got to do with M&A. We have been quiet in the last couple of years, and there's been a couple of reasons. Really, and I've mentioned this a few times, the quality of assets coming to market, the pace have been slow. And that's probably understandable. If you've got a good house or a good property to sell, you want to have the best number of bidders bidding through. And we know some of those assets, which we had targeted will come to marketplace, have been slow to come to marketplace. But we do feel with restrictions easing, with travel easing, we will find a slight uptick and we're probably starting to see the start of that now. And an interesting one for people on the call now is that increased interest rates probably help us. There's a lot of the people running around with cheap money and just buying things. We've never bought an asset because money is cheap. We've bought an asset because we have business fundamentals which we believe in, which are proven and that we buy these businesses and we apply the Hansenisation. We don't want to go and compete with cheap money. We want to actually always look to renovate and optimize the business going forward. And so that's why we still are strongly believing in that opportunity of being $500 million by fiscal '25. I think it will almost definitely be happening. So where we are at the moment now, we are expecting operating revenue to be marginally improved over -- excluding Telefónica, which as we know was a big one-off with $20-odd million dumped into the last -- dumped into with open arms, we actually took that money, Graeme, didn't we?

Absolutely.

I don't think we said no. We even gave them the quick bank account. So guys, that's the result. We're very, very happy. For those which are investing in Hansen, you'd be rest assured we are that stable, growing cash-generative business, which you've invested in for some time now. So on that basis, I'm happy to hand back to Aman. If there's any questions, be more than happy to answer them. Thank you very much.

[Operator Instructions] Your first question comes from Josh Kannourakis from Barrenjoey.

First question, just around -- you obviously went through some of the organic growth drivers of the business and some of the customer contracts you've won recently. Can we just talk about contracts like Telefónica? Is the referenceability of those starting to come through yet? And what are you seeing in terms of, I guess, the funnel for activity levels in -- certainly in those end markets?

Yes. Look, there's no doubt. Do you know, we're hoping -- what I can assure everyone on the call is it was delivered. Our component, remember it's a massive $1 billion transformational project. Hansen's thing was delivered on time and on budget. I would say we're extremely referenceable. The overall turn for what Telefónica is doing, which is really their business to talk about is that overall transformation of a refresh of all their technology, so that will still probably be a year or so sitting outside of it. But we know other Telefónica business units have a very close eye. And so I would like to think one of the things about Hansen, that we do deliver on time and on budget our projects and across the board referenceable. As far as the pipeline coming through, the pipeline's probably been as strong as ever, Josh, to be perfectly honest with you.

Perfect. And then I guess following on from that in terms of the issues around labor and acquiring talent. How are you thinking about scaling sort of head count? And could you give us a bit of context around sort of how many open positions you have now and where you want to be by the end of the year?

Yes. Well, we've got open positions at the moment now, which is no hidden secret because you could probably go to any job boards and actually find. I think we have open positions at 158 positions at the moment now. Out of that, Josh, is always there's part of that, which we know is just dealing with natural churn. But work for people, mate, if we had 100 people joining us 3 months ago and are all productive today, we'd be pretty excited by it. So clearly, there is some constraints on us at the moment now on resourcing. We always have absolute focus on customers as our #1 theme and also maintaining our R&D because we've made promises and commitments to our customers. And then the third thing is new business. And you can't go and pick up -- a lot of people make this mistake, I'd say that's a nice problem to have, then go and close the deal and not have the ability to deliver it on time and on budget, and that smell lasts forever. But we're balanced as best we can at the moment now, as I said, but I'd probably like some more staff if we could get them.

I think just to add a little bit, Josh, we've got a very targeted approach to our recruitment now. We've put on some particular specialist recruiters to assist in bringing new people on board. And that's, I think, been a successful program. And of course, as we indicated at the AGM, we were working on some initiatives around retention. It's an interesting thing. We successfully transitioned to 1,500 people working away from the office. But I think Andrew and certainly our HR team have been working very, very hard to push the Hansen culture into that remote environment, and we're seeing that helping with our retention as well. So there's lots of little programs that all just add a little bit to the puzzle, but they seem to be working very, very well.

Fantastic. And final one for me. Just with regard to the guidance. Obviously, very strong first half, and you did mention some of the benefits of the up-front licenses in the period. But perhaps you could just -- Graeme or Andrew, just talk us through a little bit into the second half, how you're thinking about that moving part. But also in terms of labor and the like, like has the inflation in that area perhaps not been as much as you were previously expecting? Or I'm just trying to get some context into the second half. That would be fantastic.

Yes. Well, Josh, look, mate, we're 1 month into -- from looking at our financials, where we are at the moment now. Look, we think that the churn has slowed, but it hasn't stopped inside the business. So we do need some more. We would like to think we will close a couple of new deals, which the market will be happy about. Look, the fact is you've got COVID. I think the other distraction at the moment now is potentially what's happening with Russia at the moment, which doesn't really affect our business. I don't have any business in Russia, et cetera. But it just takes the oxygen out of the room sometimes when people start to look at it. But look, we're so lucky to have a revenue stream, which is dependable and reliable, et cetera, at the moment now, Josh. So look, we -- as I put out there, and just reinforce, we expect it to be marginally improved over the corresponding period.

Okay. I'll give someone else a go. Great result, guys.

All right. Thanks very much, Josh.

Your next question comes from Jules Cooper from Shaw and Partners.

So one, Graeme, probably for you and then one for Andrew. Just the strong cash receipts this period. Now that obviously reflects, I would think, in part, Telefónica, but is there an expectation that, that will -- the Telefónica transaction will impact the second half, Graeme? Or is it largely captured here in the first half?

Well, I think we made it -- we did report at the AGM that the way Telefónica worked from a cash flow point of view, those monies were due to come in by the 31st of December. And they're certainly in the cash flow. They honored their payment. And, Jules, I think as Andrew mentioned, we've very much met and exceeded, I think, Telefónica's expectations, which is reinforced by the fact that they paid us in full. So certainly, Telefónica is in this cash flow from that perspective.

I think probably, Graeme, it's probably of a note now because of the new accounting treatment how we have to bring licenses forward, probably going forward will be quite interesting where we'll have revenues coming forward, reported, but the collection comes after it. So I think that ongoing handsome cash conversion will still be pretty high won't it, Graeme?

Yes. Look, there is definitely a bit of blurring of the lines from that perspective, but still...

Until the next accounting change.

Yes, exactly right. But to your point, Telefónica's certainly in these numbers, and that's certainly assisted. But as is -- to Andrew's point, as is the revenue. So we've got a continuation of that flow of cash.

Yes. Excellent. And just the last one, just on the margin guidance. I think you're sort of talking now to exceeding 30%. And I just wanted to ask, if we go back to FY '21, I think you were talking 32 to 35 on your long-term sort of number. And I just wondered, is that language now reflecting sort of the near term? Is it reflecting a change in that long term? Or how should we just read that sort of slight change in language? Both in the near term and the long term, I suppose, is the question.

Yes. I appreciate the question. And you can probably understand that, mate, giving guidance is one of the hardest things you actually do. I think what we're trying to -- I know in some of your own questions, you've actually spoke with us, Jules, has been about the people returning to offices and people traveling, whether we would revert back to that 25% to 30%. And there's been -- I know a lot of investors, there's some on the call now, have been a bit focused on what will be a cost coming back into Hansen. What I was trying to address is I think that I was trying to probably do it more in the longer term, that we think we should be able to stay above 30%, all things being equal. We don't see travel going back to the same way. We don't see office occupational going back to the same way. We think some of those investments we've made in our HR and our financial systems will see some of those benefits. So it was really probably -- I was really trying to address the question a number of people have been asking is, were we in fact, going back to 25% to 30% by giving a bit more confidence staying above the 30% is what I was trying to do.

The next question is from Nic Burgess from Ord Minnett.

Just a couple of follow-up question. So Telefónica, was there any revenue from -- any residual revenue from Telefónica in the first half?

Not worth mentioning, mate. Very, very small, a little bit of project stuff, but nothing that's material.

Yes. Okay. And then sort of back on to the margin discussion. I sort of might see if I can push you just a little bit, Andrew, in terms of the second half. I mean, I guess, underlying margin of 36% in the first half and then guiding to the 30% or more in the second half. There's a fairly wide gulf between those 2 numbers. So are there sort of planned investments or things that are going to happen in the second half that would significantly drag the margin down when you say return to that sort of trend? Any sort of color in terms of second half margin performance at this point would be helpful.

Yes, I think, Graeme -- I know Graeme touched on it, [ Virgo ]. It was about the licenses, and this is the accounting treatment. We had to bring forward. What was the license value?

It's about $5 million in the first half that we -- as you know, one of the things that we -- challenges us a little bit, Nic, is what deal's going to get recognized outside of a reporting period or the other. So at the moment, we've got $5 million this half that may not be covered -- carried into the second half. And so the revenue number will be there, but it might be replaced with services revenue [indiscernible] or a slightly lower amount.

I think without probably putting too many cards on the table, because of the accounting trends, it's a bit of a global thing, we are, for the first time, finding customers start to talk to us, Graeme, aren't we, looking to actually capitalize and bring license forward, which actually goes against people who want SaaS who just want operational cost at the moment now. And it's a bit of a -- it doesn't affect our numbers demonstrably, but we have got people which are asking questions about prepaying at the moment now, which will change our numbers around and the way the margin comes forward. I know you're after probably a more specific answer, but that was a really good example with $5 million of license fee hits in December, it could have hit in January.

To answer your question directly, there's no increased level of investment or anything like that that's going to happen in the second half, right? So this is not a case of us having to do something in the second half that changes those numbers.

In fact, the only thing is a bit of travel, Nic. I've got -- I can't believe we're doing it. We've got a global executive meeting, which is going to be in a week's time in LA, so we can single fly in there. So it is a little bit of an expensive one, but, mate, I've not been anywhere for nearly 2.5 years, and you've known me for a long time, Nic, and I'm pretty involved in the business. So there is -- but that's a one-off. And I think whilst we're traveling there, the most important thing, the senior executives of Hansen and the top like 40 executives run the business have all been in the business and we had lost -- had no resignations during the last COVID period, which is just amazing to keep them. So there will be a few costs coming. But as Graeme said, there's no big capital plans at all.

Yes. Okay. All right. That's helpful. And just lastly, just on the staff retention and turnover issues that you mentioned, particularly in some of the development centers going back to your AGM comments. The performance of the margin, though, in the first half, and I know there's license fee revenue and delivery. It doesn't appear as though those issues would hit the margin at all, which I guess, ordinarily, you might expect that, that would be the case. So any comments around how you've been able to protect margin with that sort of headwind going on? And just some of the remedial action, maybe some of the sort of measures to improve the staff retention, any detail on that would be helpful.

Yes, we've had such slow churn in this business forever. I mean people who join Hansen stay for a long time. We respect people and go get jobs. I read some data from National Australia Bank the other day, which showed the numbers of churn in different industries. I don't know if you actually looked at that. Now, the best thing about looking at that data is I read we're only half as bad as what the industry was. So we were probably quite concerned from ourselves. But the churn is not -- we're not sitting on like National Australia Bank talking IT, I think it was like 30% or 36%. We're nowhere there that sort of churn inside our business. So that was probably an interesting one. And also with the way we look at churn, there's no doubt there's countries like in India, which naturally, before COVID, have always sat between 25% and 30% churn. Now we've got an Indian operation and they're doing -- we've got about 20% of churn probably sitting in there. So therefore, you have inflow. And so the churn really has not affected. We also do our own recruitment. So if we were to go and say we've hired 300 people in the last 2 years, we would have only had to pay recruitment fees on 2% or 3% of that because we have a recruitment division inside Hansen, which has worked really, really well for us. So we don't have some of those recruitment costs. Our training of people, our onboarding is well documented, and we have a cost of always trying to keep on improving to get people up to speed. So I think some of those costs -- and so then you come down the last one, Nic, is inflation and wage increases. Well, we budget for these things in advance. We have some reprieve from our customers where we also get the CPI increase. So it's matched and I think your observation is quite good. I think we've managed exceptionally well employees and our cost of employees during this difficult time.

Your next question comes from Godfrey Ng from RBCCM.

Just a quick one from myself. In terms of acquisitions into second half FY '22, did you have any further color in terms of likely kind of size or scale of the acquisitions that you're assessing? And any kind of sense of timing around these transactions?

Yes. Look, we don't really give a specific commentary out there, Godfrey, because there's so many different deals which we would consider and look at and some targets which we would go after. All of them have to base the fundamentals that we can actually improve the margin over 2 or 3 years to the same level of margin as Hansen is doing at the moment now. So rather than pencil in, it's all part of that plan, the $500 million is where we're actually going from. And look, there are some strategic deals turning over $10 million, which would probably be interesting to us and some more bulky ones turning over $150 million, which should be also attractive to us at the moment now. So once again, we spend our shareholders' and my own money extremely wisely and not necessarily wasting it on deals because we don't have to do it. So we have a very patient approach to do it. So with no direct answer, we will be doing new deals, and they will be in all sizes going forward. And there's no doubt we've got to -- I think, as I said to you at the start of this, some of the deal flow, things we thought would have come to market owned by private equity, owned by 8 years, the time to sell the asset, just elected to hold on to the asset a little bit longer. And we're just going to be patient. It's no use knocking their door and trying to pay a big premium to unlock it. We'll wait for them to put the for-sale sign up.

Your next question is from the line of Shuo Yang from Microequities.

Just on the capital management slide. In previous years, I think you've noted a propensity to go 3 to 3.5x net debt to EBITDA just for M&A, and I think it's been left off the slide this time. Is the Board still comfortable with that gearing level?

Yes. Look, without a doubt, to tell you the truth, I think the banks have been very supportive. I think the consortium of about 10 banks, which were involved in the syndication of our debt when we bought the Sigma business, it's fair to say all of those banks have seen not only us paying their interest, but rapidly paying down their loans quicker than most companies have ever done, a few of them say in record pace. It's fair to say we'd have more than 1 suitor, which is looking to lend money to us as far as the Board is concerned. And just look at the cash generation. That's a funny sort of thing we said before, but interest rates going up is not a deterrent from us in buying a business. And those ratios, 3.5, I would say at the moment is very, very comfortable for us to achieve. Naturally enough, we would also like to think we have cash. We'd also like to think along the way that our scrip has a value in it we could use as well. So if you add all those things together, you can quickly work out the size of our appetite. There's probably not a deal we would do which we probably can't afford to do.

That's very clear. Second question, just in terms of price increases on -- in contracts with your customers. What's your willingness and ability to push that lever harder in there if you did raise cost inflation?

Well, look, a lot of companies talk about pricing power, which is a bit of an odd one sometimes. It just talks about your ability to extract money from a customer. You've got to have a bit of a balance to that going forward. Most of our contracts have the ability to increase at CPI or renegotiation at the end of their term. Our contracts also limit the number of people getting access to our software, being seats, but also the number of meters or devices off them. So we talk about Telefónica. Telefónica have prepaid $20 million worth of individual transactions from us, so all of our contracts actually follow that at the moment now. I think you've got to be very careful with pricing power because you never want to force upon anyone an increase which you can't justify. I'd much prefer to talk about CPI. I'd much prefer to talk about upgrades, et cetera, as a way of maintaining our margin rather than us being ineffective managers and expecting our customers to actually pay our inefficiencies.

[Operator Instructions] Ladies and gentlemen, as there are no further questions at this time, I will now hand back to Mr. Hansen for closing remarks.

Once again, look, I'd like to thank everyone for listening in. I hope it's been educational. A great result for Hansen in these challenging times in the stock market. And all I can say is for those which may be looking to invest, we're a bit of a safe hands and a safe company, which makes money and has a fantastic future ahead of it. And thank you very much for your time. Goodbye.

Thank you very much. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.