Hi everyone. I'm just waiting for 30 seconds to get a few more people in the door. A bit of a light rush. The meeting will be recorded today. If you don't want your voice to be heard, please put your questions in the chat or email Guy Steel at Energy One, and we'll read your question now. I'm about to start the recording now. Good morning, everyone. Welcome to Energy One Limited's Financial Year Results, FY 2025. My name is Shaun Ankers, CEO. Joined today by Guy Steel in Sydney. He's our CFO, and we have the Chairman, Andrew Bonwick, on the line as well.
We have a presentation for you, which I'll go through, and then we'll take questions at the end if that suits. We've got an hour or so, so there's plenty of time for questions. Thank you very much. I'll start a kickoff. Disclaimer aside. For those of you who don't know the company, we're an optional energy trading business, software and services. What is wholesale energy? That's the use of electricity and gas, which is a traded commodity, and its derivatives and everything around that. Our vision is to be the world leader in this provision of this Software as a Service to this market segment.
You know we're certainly a leader in Australia and developing to leadership in Europe. What's different about the company, what's special about us, that we have our unique selling proposition is that we are one stock shop. The wholesale energy landscape is very complicated, and the customers are required to do a lot of complicated things. We pride ourselves on being able to help them with all aspects of that value chain. It's a bit of a business model that we pioneered. As far as we're concerned, this is a core position for the market and our differentiators against our competitors. Without further ado, I'll jump into the presentation. Just some highlights. I will talk about the financial and in detail. Obviously, we can see there's a strong growth in revenue and profitability for the year.
Notwithstanding that we've made significant product investment, products and services, and about 50% of our salaries are actually in productive work on IT development. We've invested heavily in cyber. Those who've been following the company know we've invested heavily in cyber over the last couple of years. We're expecting to get ISO 27001 very soon. On the customer side, we have now 360-odd customers in dozens of countries in 450 installations, of which we have added 42 in the last year alone. We've made a number of improvements to our customer service globally, including global helpdesk technology for supporting our customers 24/7. Of course, building our 24/7 operations support capability from Adelaide in Europe, a very important aspect of our business. Our people, our most important aspect of the company, is our people. We're now at 200-odd people in four countries. We have 14 net new people joined.
Those who work at our... It's about a 7% headcount growth, which obviously, based on the revenue growth, you can see that we are achieving productivity gains by maintaining stated headcount growth in amongst good revenue growth. Again, trying to develop our people, we want them to stay with us for a long, long time. We institute a number of initiatives, professional training and development schemes during the year. Our ENPS is a measurement that we've started in earnest this last 12 months or so. It has increased over that time, which we're very pleased with. We want to continue down that road. Technology front, we're now used in 30-odd countries, 2,000-odd global users, so a significant user base. We have a group technology structure that is working very well under our global CTO. There are a number of benefits that we'll talk about during the meeting.
We've made technical achievements in numerous areas. Thanks, Scott. Right. Without further ado, straight into the results. We are very happy with this result. Hopefully, shareholders are too. It's right on target with what we said it would be in the operation for the trajectory. Revenue is up 17%. ARR 22%. Had a bit of an FX tailwind there, but nonetheless, a great, great growth. Particularly seeing strong growth in profitability, hitting catching good die here, 57%. Of course, end pay up 74% on taking into account the FY 2024 normalizations, which we didn't have any normalizations this year. A very clean set of accounts for you to look at. I'll just go back to ARR. Particularly with ARR with us, our metric is ARR billed, not ARR contracted, which is a measure you might see.
If we sign an account on the 29th of June, for example, that ARR will not appear in the ARR billed because it hasn't been billed yet. It does flow into the following year. We had a couple of larger accounts that signed late in the year. We were perhaps hoping to get them in April and they signed in June. The flip side of that is that you get them ready to go into the new year. We would have had a stronger metric for FY 2025. Now we've got a good order book going into 2026. This is a fairly detailed slide, so I'll just take you through it. The blue numbers are the signed. We've got them signed and on book. The orange ones are final stages, which we would expect to sign. The left-hand column is ARR and the right is the one-off project revenue.
Taken all together, all of those things signed and delivered in the orange, we're looking at starting the year with a 9% revenue growth head start. If we take CPI on top of that, it underpins our growth aspirations for the year, which we published to be 15% revenue growth. With sort of 10.5 months , 11 months to go, we're starting off the year on a high. We're very pleased with that. We'll continue to grow and continue to hopefully sign orders throughout the year. We'll keep you posted. For the next slide, I'll hand over to Guy.
Thanks, Shaun. The following slide that we'll return is a bit of detail on this. Give me some time and I will take you totally through it. Just with revenue versus cash expenditure, our cash expenditure is, as Shaun said, normalized to take in any of the one-offs. In previous years, 2025 doesn't have any one-offs. When you look at 2023, you'll note there that's the impact of the acquisitions, the Belgium business and the Australian trading business coming into the group, impacting revenue and costs. It was also a year where we invested in global systems rollout, such as ERP, global operations. One thing about those costs is they go in once and they tend not to grow. They're effectively a one-off step change, which obviously propels our growth going forward.
About 18 FTEs went into 2023. In 2024, similar, we continue to invest in our resource base, right-sizing the business. Cyber also became a focus of the business, as we've stated a number of times. As the business has grown, become more complex, I guess matured, there's a significant investment in organizational systems such as CRM. ERP often talked about risk management, human resource management. Again, those costs go into the business and they just spent once effectively as opposed to increasing every year. Going into 2025, we think we've largely got the resource base in place that we need. We're seeing, obviously, the revenue consistently grow and the costs leveling out. That clearly provides a very strong platform for margin expansion moving forward.
Looking at the revenue by FTE, one of the points to note is even though we have invested in the business through the years, the revenue per FTE has continued to grow. Profitability has always been a strong focus. Now that we're through the investment cycle, we've seen the acceleration in earnings. Just on the cash expenditure or the cash EBIT that we've got in the last column, that's obviously significantly improved year- on- year, and particularly in the last half of the year. Margins have gone from 14% in the first half of 2024 to 18% in the first half of 2025. I think this slide's fairly self-explanatory. What you can see is the various expenditure coming down as a percentage of revenue and our margin going up.
What's pleasing is when you actually look down at the business level, Australia's at a 42% EBITDA margin, up from 32%, and Europe's 27% up from 18%. Yeah, really pleasing. Australia is a more mature market, but Europe has shown that it's closing the gap quite quickly, obviously propelled by stronger earnings growth. We've talked quite a bit about our aspiration for cash earnings of 30% by around about the end of 2027. Obviously, now that we've got our resourcing right size and we're in a good position from a revenue growth perspective, we expect to accelerate that margin improvement. From the perspective of looking at free cash flow, I think one of the comments we've had previously in the business was, you know, the business doesn't generate too much free cash flow. Just for people, that's operating cash, less CapEx.
What you'll see is particularly in 2025, that's substantially improved. The second half is traditionally stronger, and it's really improved earnings, but also a working capital benefit. Simplistically, we pay our bonuses in the first half, we accrue them in the second half, which gives us a reasonable return. The last slide I'm going to talk to before I hand it back to Shaun to talk about the investment in the business and the overall strategies is our leverage. That cash, as we've said many times, has gone straight into deleveraging the business. Net debt down to $6.7 million, as you can see, leverage below cash EBITDA. We would expect to be net debt zero by the end of in about 12 months' time, allowing for the dividend that we're paying. Obviously, we're comfortable paying a dividend from a capital management perspective given the strong growth.
Very happy with the reduced leverage. Might say maybe now not so happy, but from a business perspective, very happy indeed. At that point, I'll hand it back to Shaun to talk about investing in the business and the strategy as well as divisional performance.
Yeah, thanks, Guy. You know, this increased profitability, I want to point out here, it's not come at the expense of investment. We do, it's a knowledge-led business. It's a technology-forward business. The industry is very technology-driven, innovation-driven. We've regularly kept up our investment in the technology that we provide to customers. The run rate is about 11% of revenue. You can see over the... Hello again. Sorry about that. Interrupted services to presume. 12% increase over the period. It shows we're committed to investment in the product and our service and our technology. Profitability is not, we're not seeking profitability at the expense of continued innovation. The chart on the right-hand side just gives you an idea of where that investment's going. Obviously, a considerable amount of our investment is into that achievement, what we might call productive part of the business. It's not overhead, beyond overhead.
There's an awful lot of people working on the product or directly for the customer. Well over half of our expenditures are on that aspect of it. We do invest in the product and we do focus on looking after our customers, which is the cornerstone of this very important industry where it's very technical and service standards need to be high. Next slide, please, Guy. I just want to touch on the individual business units. Essentially, we look at two now, Australia and Europe, Europe being incorporating the U.K., from a reporting perspective. The message from our Australian business is growing consistently. We've obviously got a decent market share here, but the market's growing itself, and I'll talk to that in a minute. We continue to innovate and provide solutions for that market and look after our customers in more new and meaningful ways.
I've just got some highlights here, but when we look at the revenue growth, it's sort of consistently in our mid-teens level over a number of years. You know that's driven by, as I said, our innovation, but also the market growing itself. We've signed, it's a good year, we've signed under GM for Australia, but that will minus. We've signed several tier one, tier two clients, prestigious clients. We've got multiple battery customers now live. Obviously, as you know, batteries are a major part of the new world we're all moving into. We've got some good solutions out there with multiple customers now live. A training consulting team specifically out of Adelaide asking customers to enter the market and manage their risk while they're there. Very important with a lot of new entrants into the market.
We do a terrific job in helping them through that and helping them to manage both their market risk, but also their input costs and the like. NRR, those of you familiar with the acronym, net revenue retention, was helped by our upsells and a bit of a price rise during the year. EBITDA margins, as Guy points out, now at 42% for this business. The focus for Aussie is continued growth and good margin expansion. We've got 12 new sources. We do software plus services for the famous cross-selling that we're working on for many a year. It's great to see our software and our services team going together onto certain projects. That's actually been sold as a solution now rather than two separate things. Another interesting thing is we launched a trading portal out of Adelaide so our customers can self-service the market.
The modern market is very data-driven. Our trading portal enables customers to see in real time their position in the market, which helps them to get comfort that they're in a good place, but also enables us to scale the number of customers that we can support, again, towards that leverage. A good consistent result out of Aussie. Europe, as Guy's alluded to, it's the big runway, 600 million people in Europe. A decent size market, in sort of financial sense, at least 10x the size of the Aussie market. Growing, even with a bit of an FX tailwind there, it's growing strongly. We've got a new GM for Europe, a gentleman called Ben Chanier, who's come from a tier one vendor. He's been there with us about 12 months now, really, really kicking goals there.
Working closely with our GM for the U.K., Sunny, and they're together reconfiguring that Europe business to Europe U.K., so that we have centers of excellence for customer service and for development and so on. Really pooling resources and getting greater efficiency and cross-selling out of those business units. Cross-selling has been good for us. $1 million of new ARR just from cross-selling alone in the last 12 months. That's obviously flowing, that success flowing through. We're moving out of the student decks in Paris and moving into a proper office. We are very pleased about that. It's a sign of prosperity there. Again, much more installs out of Europe than out of we would see, so 2x or 3x usually from an Australian business. It's been helped by campaigns, very successful campaigns we're running at the moment for industrial customers and for gas shippers.
Industrials the world over are suffering under high input costs caused by energy prices. Obviously, it's a much more serious problem than it used to be. The market's more volatile. Input costs have gone up. A lot more help required in managing those input costs and just managing the market risk and price risk. We can help them with that. We can also help gas shippers and the like. We've got a couple of campaigns going. It seems to be going very well. We'd expect to see some of that flow through the internet by 2026. Meanwhile, we've done some good things technically, as we did in Australia. We've got numerous technical changes and functional improvements to our products under the new tech structure. Our CTO, Damian, leads a team in each country. We're really kicking goals on some technical stuff as well as this market.
For instance, there's one example I'll pluck out there with just a market communications protocol for spot markets. We're able to deliver that ahead of time and get our customers live. It's like down ticking NRR. We had, about 18 months ago under some previous leadership, sort of dropped the ball a little bit. A couple of customers took some stuff back in-house. From my perspective, I see that NRR as a blip. Now that we've got Ben and the team working and getting things going again, we expect to grow that back up again. Next slide, thanks, Scott. Just very quickly, our strategic priorities underpinning all of that. I won't go into these in detail, but we've basically got six pillars we try and work on here. I'll just call out a couple as we go. Next slide, thanks, Scott. Particularly cyber here.
As we talked about at length in these calls, ISO 27001, which is the cybersecurity certification, will be de rigueur, if I pronounce that correctly, in the years to come. It's a very data-driven industry. Data security is critical. Our customers operate society-critical assets in the grid and so on. It's very important vendors are at the highest level. We've made terrific progress under our CISO DPAC. It's called a lot of good state-of-the-art cybersecurity investments, at least $1 million spent. Our ISO program is going very well. We'd expect to have that in place very soon. It might be before Christmas or it might be just after Christmas. That will have, from there on, we'll be able to give our customers greater confidence and our stakeholders as well. Also, from a marketing perspective, obviously, it's a major selling point going forward. Next slide.
I'm just going to take a step back real quick and look at the market. I know I've showed this slide before. What is happening in the marketplace? We've got a global tailwind, essentially, called the carbon transition. A lot of renewables need to go in. This chart shows government data, planned developments going forward. We're growing renewables in Australia by 18% and batteries at 40%. I know they've had difficulties sometimes getting that stuff to market, but the tailwind is there. Of course, gas is critical. We love helping our customers with gas. Gas will be part of the transition for the foreseeable future. Importantly for us, we supply mission-critical software and service to these customers. It's almost invariable that our software is gold or platinum tier applications to them. We need to look after them. In return, they benefit us well and they're very sticky.
We have very low attrition on customers, and that's why we try and look after them as much as possible. Next slide. In Europe, even stronger. We all heard about Spain. With renewables comes volatility. It's what they call non-firm generation, which is why you need gas and things like that. It increases volatility and risk, but also opportunity and opportunity for vendors. As I say, it's a much larger market than here. We have a more modest market share there, but we're planning on being a much stronger player there in the years to come. As you can see from our growth, we're out on the road. Next slide, thanks, Scott. That's the organic stuff. Inorganic, we've always been on the lookout for good acquisitions and things of that nature. In the year ahead, we'll see what we might call renewed interest in this.
This slide just talks to where our interest areas are. Obviously, we think the services part gels perfectly with the software part. The market is expanding behind the meter. All of the things you've heard about, distributed energy resources, virtual trading, peer-to-peer trading, all of those things, virtual power plants, they're all things we're either servicing or will be coming forward. We'll be looking for any potential partners to work with there. AI is topic du jour, but automation and trading is very important in these fast-start assets. It's all microseconds now, not 30 minutes. We'll always be on the lookout for defensive or bolt-on or maybe tuck-in acquisitions along the way. The United States, you know we're strong in Australia and growing strength in Europe. There are basically three deep and liquid markets in the world for energy.
There are other markets, but these are the three that stand out. We're very active in two of them, and it makes perfect sense for us to have a presence in the third. We've done some research on it. We'll continue to research. If we find an acquisition that really works for us and we explore a land and expand approach, that's what we'll typically do. We will act upon it. However, home markets are still very important to us. By home, I mean Aussie and Europe. Acquisitions that come up in those markets will be a priority for us. We also operate a very disciplined approach over multiple years at any of those when following a company. It must be value accretive from day one. It must bring something to us, be it capability or geography and so on. Very important for us, it must be a cultural fit.
We tend to pick and choose, and we'll find the right pick before we act on it. At this stage, the board will decide to fund the acquisition as required. Acquisition funding mix will be determined by the circumstances, but it's likely with larger acquisitions, of course, we will be having an equity raise component. Next slide. Just to summarize for you before we get into questions, business has a strong global tailwind that we're all aware of. We've got mission-critical software, so we've got a place to play in that space. We've got a differentiated and a sustainable competitive advantage called our business model and our positioning. We're seeing the benefits now come through of our working company years at 18 months ago to reshape the business, prepare for the next phase. We continue to do marketing. We're obviously seeing some success with that.
This is an important point here, 19% up to support our sales teams. As I said before, the order book going into FY 2026 is in terrific shape. Generally, the pipeline overall has grown. ARR pipeline has grown by 18%, which means we've got good coverage for growth targets and growth ambitions. Talked about cyber, key for us. Hopefully, going to get that done real soon. Inorganic, back into focus, discipline M&A as always, or any other kind of strategic partnership. We reaffirm our trajectory of 15%- 20% revenue growth, margin expansion as a key focus for us. Next slide, Guy, thanks. We don't, we're not giving guidance. We are, however, giving a bit more detail on our trajectory and what we expect and we hope to look forward to. This is a bit of detail on here, but I think you're welcome to look through it and ask questions.
Essentially, as we've said before, we're focused on good recurring revenue growth and margin expansion, whilst also keeping our options open to do inorganic and any other important development, such as a technology innovation if it's required. Thanks. Questions?
I'm sure it is. Sorry about that. Just shutting the blinds. Hopefully, the camera is picking us up a bit better. To go through the questions, there's a few in the chat. I'll look to pick them out. First one is, great result. Thank you. The question is, have any of your multinational customers requested or shown interest in you providing services in the U.S., market?
Yes, that is absolutely true. One approach to entering the U.S., market is to go with a customer, and there's nothing wrong with that. The U.S., being a big market, you really have to, you're in danger of being too big or too small if you're not careful. You have to be very careful. Yes, we would enter with them. That's a low-risk approach. To get scale and get it quickly, I would think you'd complement it with an acquisition.
Next question is, why pay a $0.075 dividend now? There was a capital raising in May, June last year. Why not pay all debt off first and keep gearing lower as a buffer in case another bolt-on acquisition presents? Aussies love dividends. Are you comfortable that you can maintain this even if macro acquisitions stall?
I think that one's for me, Guy, from the board. The dividend is partly a long-term process which we've adopted that shareholders should be rewarded for acquisitions, particularly, and that we've made in the past using shareholder capital. While that's not been a large amount of capital, we floated with 20 million shares in 2007 and we've got 31 million now. Nevertheless, the dividend policy says 40% of net profit is a dividend and that's a payment to shareholders for our success. It's part of capital management that we're using the capital partly to pay down debt and partly to reward shareholders. It's a balancing act. Hope that helps.
Thanks, Andrew. In Europe, EBITDA margins are 26%, the Australian 42%. Any structural reasons why margins in Europe cannot approach Australian margins in the long- term? I mean, one, let's show an answer in more detail. One thing I would note is the Europe margin this year is not far off what the Australian margin was last year. It's chasing and chasing hard.
Yeah, to answer that question, there's absolutely no reason why that shouldn't happen. I think the Aussie business, it's been more stable for longer, so you can work on things. Europe's sort of rapidly expanding, if you like, in a big and wider market. You know, obviously a bit of a price to pay in terms of getting all of that humming. That's what we're doing right now. As Guy said, we're making significant progress in there. As you know, we continue to discipline that we make our keep our costs under control compared to our revenue and the rest will take care of itself. Yes, there's no reason why we can't get there.
Next question is, what % increase was the price rise in Australia and Europe that was implemented, and what was the effective date of this price rise?
I think we'll keep that generic if you don't mind. We have a variety of customers at different price points. Certainly, where it was called for or appropriate, we increased prices to where perhaps they hadn't been increased for a while or something. Yeah, the blended price rise part of it came through in January you saw. Of course, some of it will come through from July onwards.
Yeah, I mean, July is typically the date that a lot of our contracts roll. That's very typically a price increase point.
I would also note, adding in Andrew, that we also have CPI across the breadth of our customers. These out-of-cycle price rises relate to changes in the cost base and changes in the way that we're resourcing up things like ISO for the benefit of customers. There is a variety of things going on there generically.
Thanks, Andrew. Is there still a direct correlation between the economic project revenue and the following period's license support revenue? I'll answer that one quickly. Yes, there is. Through Q4, we saw an uptick in project revenue. Half on half, it's increased. That obviously leads into the ARR. The slide where we talk about the current order book, a lot of that ARR that's due to go live over the next couple of months manifests itself in project revenue through the last quarter of the year. Here's one for the auditors. Regarding impairment testing assumptions, revenue growth assumptions across Australia and Europe have increased from 9%- 9%. What is the thinking between those revisions? Typically, we look at them, so I put together the impairment model. Typically, we look at them based on on-book performance.
One of the other things we also look at is market valuation, where the market values the business and getting the impairment model, I guess, somewhat consistent with that. That is behind some of the raising, but it's pretty much based on performance. The other thing we did increase is the terminal rate to 3.5%. That was really as a result of market valuation. Regarding the behind-the-meter markets, could you please give us some examples of what you mean by this? How much revenue is currently derived from this sort of end user?
I'll just explain what behind-the-meter means. Typically, in wholesale energy, it is at the meter of the gate, if you like. If you're grid connected, you're a large player and you're actually involved in the grid or you're a wholesale player, you're trading in front of the meter. If we're a big generator, they're all in front of the meter. Behind-the-meter refers to those embedded generation. Let's take a large factory with a bunch of solar panels on the roof. They don't actively maybe participate in the market, so they're not a participant, but they still have a trading capability. They're either a generator or a user. Virtual power plants, for example, can incorporate both elements of it. You could be a consumer who's willing to switch off.
Those are being captured at the moment under innovative contracts offered by, let's say, retailers. There are a few retailers in the Aussie market who are attempting to stitch together those guys who don't have, if you like, a market license. They are aggregating a load and then being able to trade that. You can do that in a physical sense, distributed energy. The virtual aspect of it is when you're trading rights to power and also things like, as I talked about, a containable load. We're talking about things that, if you like, tier one is the people who are market connected. Tier two would be large players who are not in the market, but they are significant and material in size.
Tier three, and these are my terms, no one else's, would be mum and dad and getting all those solar panels where you can trade with your neighbor in a fungible load that you could trade into the market. That's the future, right? With all this peer-to-peer trading in the future, behind-the-meter is where it's the long-term global future. Great thing for our company is when that power comes to market, it goes through our plumbing to get there. We're offering that ability to trade that power into the market, however you aggregate it or however you organize it. There are some very clever structures out there. There are very clever retailers in the market doing stuff like that. We're offering that as well. The big thing we're seeing at the moment is this virtual trading where we're literally just trading rights and not physical power.
We're trading the ability to switch on or the ability to switch off because it just provides them what they call flexibility in the market. We offer that already. It's still, to answer your question here, it's still a smaller part of the business, but in 10 years' time, it will be a huge part of the business because, of course, you don't need me to tell you that that part of the industry is expanding. At the moment, we're still nascent, but we have high hopes for it. As I've talked about on the inorganic slide, if you've got someone to partner with who's already got some of that behind-the-meter wiring going, then that's exactly what we will do.
Thanks, Shaun. I do notice there's a couple of people who've got their hand up online. John, apologies for missing you, but if you want to go ahead now.
Yeah, excellent. Thanks to the team. Appreciate the time. Great set of results. Firstly, obviously, Shaun, not quite raising the bet as yet, but congratulations on your tenure and all you've achieved. It's obviously been a hefty amount. To see the share price like what it is today, congratulations. Moving through that, maybe just a couple from me. Just one sort of more specifically on the ARR. You've called out the order book growth. We've obviously seen a positive start to the year, predominantly also because we've seen it spill over from last year. Can you give us a bit of a feel for the mix of what's in that, large, small, what sort of customers, and also the timeline for that to be implemented and start billing?
There are a few questions in there. It would be fair to say that we have a higher, you know, in any given year, 2/3 of our customers might be on that kind of medium-small ticket, and 1/3 , you know, or less might be sort of larger. In Europe, particularly our French business, picks up business at that kind of steeper price, perhaps $100,000 a year or something. It is a mix. It usually would be a few large ones, some mediums, and a tail of what we call smaller. When I say small, and we've said this for many a year now, small is perhaps $100,000 of ARR per year. Obviously, the smaller guys come to market, come to fruition quicker from signature. Some of the big ones might be ages because you do a bunch of work for them, particularly with enterprise-level customers. It's usually a slower burn.
I guess if you, and this isn't a scientific assessment, but if you want to do sort of a blended time from signature to billing, what would you say? Four to six months or something?
Yeah, I mean, in enterprise, it's, I think, longer than that, getting out towards 12 months at least.
On a blended basis.
Yeah, on a blended basis, you know, about France, three months, so yeah, six months.
It doesn't, you know, the answer to all these questions does depend. Hopefully, that gives you something.
I appreciate the answer to the question. You previously, I think, have widely spoken around geographic expansion, particularly with the charts around Europe, and you're now talking towards the U.S. Can you talk us through the advantages of the Australian business, potentially what that allows you to do in the context of Europe and also the U.S., noting things like the batteries that follow the sun model? What sort of advantages do you feel like this gives you internationally?
We obviously have great products and services. One of the key differentiators of the company is its business model and the ability to provide a solution to customers, if you like, no matter where they are and whatever they're doing. It is key for us to be able to transport both technology and services to customers. We service European customers out of ours and likewise, which gives them comfort that we've got, let's take a night shift, for example, with someone else on day dealing with their day shift, dealing with their needs. We can look after them with that and we can transport technology around. We do have cross-pollination of technology, not wholesale moving, but tools and new tools, let's take batteries, for example, that technology can be reused in other locations. We get efficiency from that.
At the end of the day, no matter where you are in the world, you're basically trying to manage risk and increase profitability as a participant. In the U.S., for example, their needs, although the markets, there's multiple markets and they've all got different rules, they're essentially doing the same thing as anyone here, which is fine. You know, if you like, get their gas to the factory gate at the best price or sell their power into the market at the best price or manage a portfolio risk or market risk or counterparty risk, any of that sort of thing. It doesn't matter where you are, you've got a common set of needs. Although the market rules are different, the business need is similar. Providing that business need across geographies enables us to offer solutions to both multinationals, but also to U.S., domiciled companies.
Obviously, it's necessary to have a presence in that market, hence the acquisition idea, but the needs are the same and the business model that we've constructed and all elements of it are vital. Although we represent these two geographies from a reporting perspective, operationally, they form part of a global solution and that's what we're particularly proud of.
Thanks for your time, gentlemen.
Thanks, John. Next question I'll take is Cameron, who's got his hand up. Cameron, if you want to ask your question.
All right, thanks, Shaun. Thanks, Guy. Great numbers again. Well done. I suppose if I can just start around the healthy growth in ARR that's been recognized. Obviously, the FX tailwinds helped, but excluding that, you know, 16% growth year-on-year currency could have been even better if some of those deals you've highlighted that dropped in July fell in June. I suppose just around the July ARR contribution you've highlighted, can you help us just understand the split? Is that a bit more Europe-focused than Aussie or vice versa? Thanks.
There is a bias towards Europe and Australia, actually batched pretty well in that mix with larger enterprise customers. It is a bit of an even blend. What's pleasing as well is it's getting up towards 60% new customers, new logos.
Just on the procurement front, like to see Australia, which is quite mature in terms of its market share, but it's growing well. You guys continue to win new business and Europe's really sitting fire, which is great for you guys as well. Is there anything to call out you think just beyond particularly where Europe is concerned? The traction you're seeing there beyond the successful promotion and cross-selling campaigns, is there perhaps some larger accounts signed through the period or any key products sold? Just some further context would help. Thanks.
Oh, look, certainly our aspirations, Cameron, are to pick up more and more tier one customers, right? I suppose the business, when you're starting up a business, you have tier two customers and then get some tier ones and that's good. Then you want more. The tier ones are obviously a much bigger account. We love the tier one, tier two, even the tier threes. When you get a couple of whales in the boat, it's good, right? We do target these guys. It's very important with these larger accounts that you have the bona fides and the credentials to deal with them. A good example of that is cybersecurity. You literally will not get work in a few years' time without that cybersecurity ISO accreditation. The investment there has been worthwhile.
We are positioning ourselves to suit all customer sizes, but there's no doubt that obviously bigger accounts are desirable and our level of professionalism increases year- on- year with the company as we get ourselves better organized and corporatized as we get more mature and we set our caps at getting those bigger guys. Our European business under Ben is really going to professionalize the aspect of our sales and marketing. He's come from a big company and he knows how these big vendors work and he brought some insight to us for that. It's great. We're setting our cap at global accounts. There's no doubt about it. We're happy with what we've got, but if we can come back next year and report a couple of major accounts, we'll be very happy.
Yeah, and I suppose then on your outlook and your pathway to that 30% margin that you're targeting, particularly for the forthcoming year, if you're looking at really only a modest headcount growth target again, but the top line looks to be certainly coming through at a rate that you're targeting. Is there a point where you perhaps need to step on the accelerator in terms of reinvestment a bit more just to continue to hit those 15%- 20% rates? I suppose particularly wanting to win more enterprise, right? That might take just incremental people. Just trying to understand that a bit better, I suppose.
That's a fair question. The short answer is yes. The long answer is we operate a balanced approach and I always have tried to do that because obviously, you know, we're not just investing for the sake of it and we're not sweating the asset either. If we get a larger account that requires investment and we've carved that out of our trajectory and our lengthy disclaimer, we've carved that out. If we need to invest, we absolutely will and I won't hesitate for a second and that's what we'll do and we'll come back and tell you about that. Sometimes you've got to do those things to get the big guys. You have to commit, you have to commit to do things. Otherwise, you know, because we're dealing with people with tens of millions of customers perhaps who are, you know, it's a very, it's a different client base.
If we have to, we will. The BAU is to maintain fiscal discipline on a separate subject. If a couple of years go by and there's a pivot required, then, you know, again, we'll make that very clear to everyone that a pivot is required. As we talk about our short to medium trajectory, which is fiscal discipline and steady growth.
All right, thank you. Maybe one just last one, if I could throw it back to Andrew, just around the dividend that was sort of great to see for investors. Is that something people should begin to think about a little bit as well on an interim basis as well? Just, you know, the profitability is clearly ramping up, the cash flow is good, assuming no M&A is, you know, an interim and a final dividend, something people can be considerate of or just a final dividend for now? Thanks.
Let's keep it simple, Cameron. It's an outline that it's an obligation to shareholders based on a percentage of profitability. We've always paid finals. If it's appropriate to change that in the future, we'll do so. Otherwise, there's a lot of things that go into the level of and whether we change the dividend. I'll keep my flexibility there if I may.
Yep, understood. All right, guys, thanks for the time. Well done again.
Thanks, Andrew.
Good time, we've got 10 minutes, so let's just try and.
Yeah, I was just going to try and rattle through the questions as they've come through the chat. Can you prioritize existing shareholders for any capital raisings to encourage new ones to buy on market? I think that's more of a comment than a question, maybe. I'm not sure, Shaun, if Andrew, if you want to.
I'll handle that, Andrew.
But.
Yeah, look, you will notice in our past financing of acquisitions has been done by a mix of banking placement to large investors or placements to existing shareholders in various mixes at various times. We do it to balance up cost of capital and the rights of existing shareholders. Yes, definitely.
Regarding the U.S., acquisition targeting value accredited from day one, should we interpret it as a target being earnings positive? Yes.
100%.
Yes, it will be. Does the ARR growth trajectory factor in the head start at 7%? Yes, it does. Regarding acquisitions, is there a particular hurdle rate for return on investment for potential acquisitions? Maybe Shaun, if you want to quickly comment. We've obviously touched on, got to be value accretive, consistent, or give us something we don't have.
It's all price, right? It's all about price. As the people on this call know, you've got the fundamentals of a business and then you've got the price that you have to pay for the business. Sometimes they're not always complementary to each other. An absolute high floor is that it's earnings accredited. We're also trying to get over the hurdle rates of RO, return on equity, and all that sort of stuff. Nonetheless, we assess the value of the business in terms of its long- term, not necessarily its short- term. We're always trying to be long- term thinkers here. Pay a bit more for something because you know in the long run, it's going to come out for you. Next question.
Can you please talk through the reasons why clients took the service in-house? This relates to our French business, and the primary reason was the customer got to a certain size where the scale benefits of doing it internally and setting up their own team made economic sense. I think it's as simple as that. We have a couple more online questions. I think Caleb, I'm sorry.
Claude.
Yeah, I think Caleb had his hand up before Claude. Caleb, fire away.
Thanks, Shaun and Guy. Congrats on the results. Is there normally much seasonality in the business where a lot of these contracts get sort of begin billing around June, July? Is that sort of how we should see the run rate going forward?
I think it's defined. If the business is defined, that kind of analysis for many a year seasonality, you know, yes, it's usually a bit strong in the sector, but I don't know. I wouldn't, I'm not willing to sort of say that that pattern exists, Caleb.
Okay, thanks. Just on the churn rate, when it spiked up a bit to 4% this year, is there any particular reason?
I'd call that a couple of notables, but you know, I think about 18 months ago, 12 months ago, we put a new DM on. It's just tightened up a few things. I do see that as churn, as that 4% number is a little bit of an aberration that I would expect to get back down again.
Yeah, I think that's fair. I mean, it has bounced around over the years, so yeah, we expect it to perform within a band.
Thanks. I guess, on the gas market, you guys are quite excited about that. How's the competitive environment there? Is it similar to existing markets? Are you guys a bit more well-positioned there?
Gas is a critical energy source for the world, and it's changing as well. Go back 20 years, it was a, you know, I've got Ian Tenebring on the call and he's an expert on this area. Go back 20 years and it was a bit more predictable. Now we're in a world of global energy prices, and that volatility has flowed through all sectors of the market. Volatility equals risk, but also equals opportunity to help people manage that risk, and that's what we do really well. Of course, there's always competition. You shouldn't be afraid of competition. What we do is provide solutions to people that incorporate more than one thing. Traditionally in the energy space, vendors got pulled at one thing and just pumped that one in. We give you more than that. We'll give you a solution made up of various aspects.
That's the high level answer to your question. If you wanted a detailed one, we could take it offline and talk to Ian and get you some more information.
I'd also note, Caleb, we've been in the gas markets in Australia and in Europe from the get-go. It's not a new thing for us.
That's all from me. Thanks, guys.
I believe Claude has a question. Claude, feel free to go ahead.
Great, thanks, guys. Can you hear me?
Yes.
Yeah, cool. Thanks for the great results and the informative presentation as always. Congratulations on deleveraging the balance sheet massively since you used that debt for the last acquisition. The first question is more for you, Andrew. Can we rest assured, given the way you used debt that last time, if you ever did a future acquisition, you'd also use debt in order to minimize dilution from that kind of thing?
It's a balancing act, Claude. I think it would depend on cost of capital versus cost of debt versus opportunity for other shareholders. Obviously, at the moment, our cost of capital is low. That would feature well in.
Correctly thinking, if anything, that's probably gotten lower in the last couple of years.
Oh, certainly the last six months, Claude, yes.
Okay, great. Thank you very much for that. The second one, more for you, I guess, Guy and Shaun, is casting your mind to a situation, ideally in Europe, but in Australia or Europe, I'd be interested to know a situation where you've gone for some business, gone for a tender, but not been successful. What's the reason that you're not successful in that kind of scenario?
Sounds like a behavioral event.
What do you spend a week?
Yeah.
At enterprise level, and it's not unique to us, there are a lot of factors at play when dealing with a customer at an enterprise level. It's not just functionality. The customer might have a hundred things they want a new bit of software to do. No one will ever do a hundred. I don't care who they are because the customer's invent requirements as they need them. They may not exist elsewhere. If my competitor's got 60 things out of the box that he'll tick boxes for and I've got 70, then we're panicked. You've got functionality and then you need to show a pathway to close that out. If they do better at showing the pathway or they got a higher number than you on the first branch, then you've got all kinds of behavioral human type things as well.
The trading manager used the other software at the old place. They know it, they like it, they're sticky. These kinds of things come in. He said we'd love it to be fully methodical, but there's an organic human nature to these things as well. We're dealing with trading entities and the front office in any trading entity obviously is a key sider. The traders get to decide what they like to use. There are all these kind of moving parts, certainly in enterprise. At SaaS, what we call SaaS, which is a bit more like licensing, sign up for a license, it's out of the box. You're not doing customizations. Again, it's a similar story, but perhaps a bit more of the landscapes have been smoother. The guy used it before, the lady used it before at the old job and they really like it.
They have a particular way of operating and their bit of software that someone else has got does it for them. I go back to our portfolio offering, which is that it's not necessary to have, I don't believe, philosophical question point, necessary to have the best of breed in every single department, although we do have best of breed in areas. The solution that you provide to the customer is increasingly important. We can provide the software and the service. We can provide you a contract denominated in euros under French law with a French help desk. These kinds of things become important. The landscape of our customers, they're operating in multiple markets with multiple vendors. That solution called simplifying the landscape for them is itself a virtue.
You don't necessarily have to have 100% on the requirements because you can offer them overall a solution that suits their needs. Does that help?
Thanks, that does help. I guess my next question regarding the product would be, how can you improve on that advantage? Do you think you're making progress in that sort of competitive advantage in building out the entire solution, or is there increasing competition from somebody else by any chance?
We invest slightly. What was the slow? 13 is the answer. We invest heavily in innovation to improve the products, improve the services, get a better outcome. It's absolutely something you have to do. If you're not going forward in this game, you're going backwards. You need to be working on it, getting better, a better module, a more useful thing, refreshments to the front end, improve it, improve the UX/UI , all important stuff, all important stuff. There's always competition. What I talked about before, the nature of the business is that competition in this game traditionally comes to someone who comes along with a new thing that's strong in one area. They might have a good bit of gold rush, a bit of a land grab in that certain area.
Pretty much after a while, the realities of the business is that customers have portfolios and of assets and a portfolio of risks that they need to manage and not just one thing. They do need to have an increasingly sophisticated outlook. I'll give you a very simplistic example. If I build a battery, I can just operate that battery on its own. If I've got two batteries, now I've got a portfolio. If I've got three batteries, now I've got a complex portfolio that all have to balance off against each other. You've got a different set of problems. Also, you've got a compliance load and with the markets themselves, you've got to deal with vendors who've got cybersecurity. It gets very quickly away from the purely functional conversation and into the solution. Hopefully, that helps.
Yeah, thank you. I really enjoy hearing you explain the business. I guess final question for me then on the operation, just while I've got you talking about it, with implementation processes and implementation times, could you please talk a little bit about that? I guess specifically whether implementation times are increasing or decreasing?
I'll answer the second one first. No, they're not. Software as a Service software, you know, our package product on that.
No, they're not. Are they increasing or decreasing?
They're the same as they've always been. Enterprise customers.
Gotcha, gotcha.
You know, smaller SaaS customers. SaaS products are usually out of the box. You don't, you just take it as is. It's quite quick. Now it has been. Enterprise customers can vary from a few modifications, a few customizations to two years of work before they go live. You know, that's rare. We did say a blended, a blend, if you put them all in the pot and mix them up and say what's the average from signing to billing, it might be four months or something.
Thank you very much. I was just going to say in terms of the implementation, obviously as the product matures, it has more functionality now. Obviously, implementation naturally is easier.
Cool.
Thanks very much. I think that is all of the questions. I don't think there were any more questions online. I think at that point, Shaun, we can probably close it out.
Any final questions? Thanks. Thanks everybody for listening to us, and enjoy the rest of your day.
Thanks, all.
Thank you all.