Billing services companies are great businesses because they work in the background, making everything run smoothly, and the company receiving the service can focus on what it does well.
Hansen Technologies (ASX: HSN) deals in utilities billing and smart metering for utilities and telecommunications sectors. In addition, it offers outsourcing and facilities management services. It has good international diversification, with 50% coming from Asia-Pacific, 31% from Europe, Middle East and Africa, and 19% from the Americas.
Its three segments are energy utilities, telecommunications and pay TV. Although the first two are mature markets in themselves, the billing processes that they require to keep everything operating and up to date are what the company can provide within an integrated system that can handle complex billing solutions. Competition in similar software services is fragmented, so the company can pick up customers with its comprehensive system that allows high-level scaleability.
Pay TV billing was just added in 2013, through the acquisition of the ICC Pay TV customer care and billing software business. It has customers in 40 locations around the world, and apart from adding a new line of business and revenue, it offers the potential of entry into these new markets for its other business segments.
As for the financials, although revenue hasn't dramatically increased over the past years, its net earnings have gone from $720,000 in 2006 to as much as $12.86 million in 2012, or a compound annual rate of 61.6 % over those six years. Accordingly, this has steadily increased its net profit margin, which went from 1.46% to 22.74%.
In 2013, net profit after tax dipped down to $9.13 million, but in that year two acquisitions took place for a combined cost of $13.8 million, which would reduce earnings. The two acquisitions added about $11 million to total revenue, which resulted in $64.7 million for the year, as well as contributing $0.98 million to after-tax profit.
Foolish takeaway
Hansen offers a 5.17% dividend, and has a price-to-earnings ratio of 20, which seems reasonable considering it had a past three-year average annual total shareholder return of 22.97%, and a good track record even before then. The share price at $1.16 now may be a pause before it takes off upward again.
Over the past 6 months, it has risen about 28% in share price while the S&P All Ordinaries Index (ASX: ^XAO) rose only about 8%.
