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Why the Hansen Technologies Limited share price jumped today


Shares of Hansen Technologies Limited (ASX: HSN) surged as much as 12.3% higher today following the group’s first-half earnings results, although the shares have since retreated to just $3.33, up 2.8% from Friday’s closing price.

What’s happening?

Hansen Technologies is a name unfamiliar to most investors, yet it provides a service which is absolutely critical to most businesses. Specifically, the company provides and implements billing solutions to service providers within the energy, Pay TV and telecommunications sectors, whilst also supporting their customer care efforts.

Notably, billing applications represented more than 91% of total revenue in financial year 2015, while IT outsourcing and other software/service provisions made up the remainder.

Data from 2015 Annual Report

Data from 2015 Annual Report

Without cash flows from their billable customers, these companies wouldn’t last too long so the services that Hansen provides are absolutely critical to their success. Better yet, the services can be costly and take a long time to implement, resulting in a very sticky customer base for Hansen.

Hansen’s shareholders were given a preview of what to expect late in December when the company said it expected to report operating revenue between $72 million and $74 million for the first-half ended 31 December 2015, while it was also expecting an EBITDA (earnings before interest, tax, depreciation and amortisation) margin “at the top end” of its target range of 25% to 30%.

Actual revenue was right at the top end of Hansen’s guidance at $73.99 million, up 50% on the prior corresponding period, while EBITDA was $22.3 million. That represents an EBITDA margin of 30.1%, above the company’s target range, while net profit after tax (NPAT) also rose 43% to $12.63 million.

Commenting on the results, the company noted: “We have continued to benefit from international expansion with the first full six months contribution from the TeleBilling business purchased in May 2015 reflected in the results. The TeleBilling business has been successfully integrated and continues to deliver opportunities within the Scandinavian market.”

It added: “We have also seen strong organic growth in our core billing business as a direct result of our continued investment in sales and marketing. This investment in our people and our products has delivered new opportunities particularly in India in the Pay TV market and in Japan in the Retail Energy sector.”

The company’s directors also declared a 3 cent per share dividend, of which 2.5 cents will be fully franked.

What happens now?

Going forward, Hansen will continue to look for ways to improve the returns on its existing products, boosting organic growth, while it will also remain on the lookout for further acquisition opportunities which have provided it with much of its growth to date.

Although Hansen’s management team didn’t provide specific numbers for its outlook, it reiterated that it believes revenue and EBITDA achieved during the first half can be replicated in the second half of the year, which bodes well for existing shareholders.

Personally, I think Hansen’s shares could still make for a great investment idea for long-term investors. The shares are currently fetching $3.33, up 77% over the last 12 months, but 12.4% below their 52-week high of $3.80. I currently own the shares and am certainly considering increasing my own stake around these prices.

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Motley Fool contributor Ryan Newman owns shares of Hansen Technologies. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia owns shares of Hansen Technologies. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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