Hansen Technologies Limited is an Australia based company providing billing, customer care and IT solutions. The software provided by the company is used in varied sectors including telecommunications, gas, water and electricity industries. It has over 500 employees who are providing customer and billing solutions in over 45 countries. Over the last 5 years, the company has averaged a dividend yield in excess of 7% despite a relatively low payout ratio. Of even more importance is the fact Hansen have maintained a average ROE in excess of 20% on the back of higher retained earnings, showing the management teams prudent use of shareholder funds, a rarity in this day and age! Needless to say, the market has enjoyed Hansen’s irregular but inevitably positive market updates.
Figure 1 : 2 Year Price Chart for Hansen Technologies
There has been a minor decrease in the key performance parameters (lower EBITDA and Profit Margins) in the past year can be attributed to a higher revenue base for the company. Hansen is however able to maintain a high profitability in a sector which has shown heavy growth of competition in recent of years. It has made a host of recent acquisitions, including Banner CIS which it acquired in May 2014 adding over 100 employees to their North American team. It also acquired Utilisoft and Irdeto ICC Billing in March 2013 and January 2013 respectively. The Hansen team have shown high levels of care in the use of capital in acquisitions, with all recent acquisitions adding to both revenue and the bottom line in very short time. Additionally the company’s management has proved their ability in integrating diverse cultures and clients.
The company was founded by Ken Hansen in 1971 and he remained on the board of the company until 2012, when he passed away. The reins of the company are in the hands of his son Andrew Hansen who has been the CEO of the company since 2000. Looking at the past growth of the company it can be said that the company is in the hands of honest and competent managers. Hansen Technologies is in the billing industry where the basic attitude of every buyer is “If it ain’t broke, don’t fix it”. The buyers of the company’s software do not want to make key changes unless there is a major upgrade throughout the system. Following recent bolt-on acquisitions, Hansen can now offer complete offerings, making them far more competitive in this space.
The long bullish trend in the stock is an indicator of the strength of the underlying economics of this business and the competent handling by the management. However it remains to be seen if the company can be taken to a higher growth path given the increased and often fierce competition from IT firms from around the world.. Over a long run it would require deft handling of the various divisions of the business to survive changing business environment and newer technologies. Further deregulation and increased adoption of smart meter use should provide a significant catalyst for growth, should the Hansen team be able to capture adequate market share.
Disclaimer: The owners/writers for YourWealthWatch hold an indirect holding in Hansen Technologies.