Hansen Technologies Limited (ASX: HSN), established in 1971 and headquartered in Melbourne, Australia, develops, integrates, and supports customer care and billing software for the utilities, energy, pay-TV, and telecommunications sectors. It has a global customer base of over 500 clients.
On May 1st, 2019, the company released the details of the acquisition of the Toronto, Canada-based Sigma Systems, which is a well-known provider of catalog-driven software products to the mg the edia, telecommunications, and high-tech industry players worldwide.
The enterprise value consideration for the transaction is around CAD 157 million (~ AUD 166.2 million), that will be entirely funded by new bank debt facility of AUD 225 million. The deal is executed at an EV/EBITDA multiple of 8.3x CY2018 normalised EBITDA. The acquisition is expected to close by end of this month on May 31st, 2019.
Essentially, the company’s motive and the strategic rationale behind the move is to leverage Sigma’s products portfolio which is adjacent to Hansen Technologies’ key business of billing and customer management. Thus, Hansen would be more than well placed to tap into the growth opportunities that arise from the roll-out of the new telecommunications services like 5G. The company believes that the revenue from the telecommunications sector would have mounted to 38% (relative to the actual 17% share) of the total in CY18 on a pro-forma basis if the acquisition occurred during that period.
In its recent Investor Presentation for Goldman Sachs Emerging Leaders, the company stated its revenue split on the basis of vertical and geography. Accordingly, the energy sector generates the maximum revenue (60%) followed by telecommunications (17%) and Pay-TV (12%). In addition, Europe, Middle East, and Africa (EMEA) region contributes the most to the total revenue (54%) followed by Asia Pacific (22%) and Americas (24%).
As per Hansen Technologies’ five-year track record, the revenue has grown at a compound annual growth rate (CAGR) of 28% to $ 230.8 million the financial year 2018. Besides, the EBITDA has also grown at a CAGR of 25% and adjusted earnings per share (EPS) at 18%.
As the company is expanding its size and scope into new market segments and geographies, the plausible synergies as well as acquisition opportunities are also growing with time.
Hansen has a current market valuation of around AUD 712.18 million with ~ 197.25 million outstanding shares. On the back of the deal, the HSN stock price surged 17.21% to AUD 3.160, by AUD 0.530, with the close of the trading session on May 2nd, 2019. However today, 3rd May 2019, the stock is trading marginally up by 0.277% at AUD 3.620 (AEST:1:18PM). The major shareholders include the Hansen family (18%), institutional investors (40%) and retail investors (42%).
The company announced a fully paid interim dividend of AUD 0.030 and paid it out on March 29th, 2019 with respect to the six months ended December 31st, 2018. Recently, Hansen also declared that for the purpose of the interim dividend for FY2019, the application price under the Dividend Reinvestment Plan will be AUD 3.05 per share.
For the first half of 2019, Hansen Technologies recorded the operating revenue of $ 112.4 million and an EBITDA of $ 28.5 million (EBITDA margin of 25.3%). Besides, the NPAT amounted to $ 12.9 million. During the concerned period, Hansen appointed Regional Finance Directors for both EMEA and the Americas to strengthen the regional management structures and increase the effectiveness of governance.
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