Products be manufactured locally under one of their GMP licensed local facilities. Which is why the need and the opportunity for us to build local assets and control the GMP license in the U.K. and other markets is critical to what we're doing.
To add to that as well, the customers in the local markets, they want to make sure that their supply chain is consistent. The cost of patient acquisition is enormous, and as a result, being out of stock can mean that you would lose patients that you've spent a lot of time cultivating and attracting via your clinics or doctors and so forth. Having the local supply ensures that they don't have the outages where imported products get held up with import permits and supply chain issues from overseas. Having it done all locally means that there's guaranteed supply and guaranteed ability to maintain and retain those customers.
Okay. We're going to speed up and get through the next five or so slides in a couple of minutes. Just to reiterate, FY 2026 guidance, AUD 65 million-AUD 75 million, midpoint AUD 70 million. To deliver that, we're very much in the ballpark. It's at the low end, AUD 12.5 million on this current quarter in revenue, versus AUD 21.3 million for the previous quarter. To hit the high end of revenue guidance, we need to deliver AUD 22.5 million on this current quarter. We're on track. If you look at this year's guidance and look at the big contract we've just signed overseas, you can probably piece together an idea of where FY 2027 guidance will end up, but we're going to deliver that once the board signs off on our 2027 budget in the coming month.
In terms of cash flow, we've continued to build our cash receipts. We had a planned and intentional negative cash outflow in Q1 of this financial year, that was to significantly invest in inventory to meet both local, so Australian, and international demand. We've continued to scale up our inventory levels to meet further demand whilst generating positive cash. This year will be our second full year of positive cash flow in a row. Won't spend too long on the ADREX contract. It's a very strong local partnership with a company that has deep roots into traditional pharmaceuticals as well as same-day distribution to 20,000 pharmacies in Germany. We are incredibly excited about this partnership, and we are investing in it alongside our German partners, and it's going very well so far.
Big market potential. Just to touch on one of the most important bits in this slide is the dual approach. We're not just a white label contract pharmaceutical manufacturer. We have our own proprietary brand, that sits alongside as a friendly offering to our clients, clinics on their formularies to prescribers. They want to see brand diversity, product diversity. The Dr. Watson brand is going very well, and we're pushing it. It's now getting into Germany, the U.K., and it's also been in Australia for the last three years. Sorry, also Latin America. First half a million dollar delivery is going out, I think, before end of financial year, which is great. We're a fast mover in LATAM . We've touched on new product capabilities. We have been assessing M&A opportunities over the last 12 months.
What we've wanted to do is demonstrate our organic potential, the growth potential, and all the growth to date has been organic. There's plenty more organic growth to be delivered over the next 12 to 24 months. We are assessing M&A opportunities, and what we will do is, anything that we look at will be accretive and strategic. We have a very aligned board and management team. Everyone on this slide is an investor, cash investor, and a shareholder. That goes all the way through the executive team, the management team within the subsidiaries and the groups. We have a very high percentage of our staff actually purchasing stock, which is great. A lot of commitment there. A wealth of experience, both in cannabis and financial services and traditional pharmaceuticals as well. Last thing, we recently announced the 10-for-one reverse split, so a consolidation.
The purpose behind this is to get out of that penny stock sort of perception, become more institutional grade, reduce the volatility, and also to change the name of the company. We've been Bioxyne for the last three years. Breathe Life Sciences is the operating business, the group underneath Bioxyne that is delivering the numbers. The ticker's going to change to BLS. The name is going to change to BLS Pharmaceuticals. We're going to create a consistent logo throughout the business. That will just enhance our brand presence in the market. Mark, I think we can probably wrap it up there. Sorry, we're going slightly over time.
That's fine, Sam. Actually, one of the questions was just on why you were doing the share split. I think you've covered off that one. One I just want to quickly cover off, supply to the German market. I think you did mention it in the presentation. Is that going to come from the U.K. facility or the Australia facility?
It's coming from the Australian facility at the moment, and it probably will continue to for the vast majority of that supply. We're really leveraging that Australian capacity to grow overseas.
Another question around why customers use Bioxyne versus other competitors. What do the big brands need to use Bioxyne? I guess to come to Bioxyne as a manufacturing partner, what do they need to see?
Consistent delivery, on-time delivery, faster turnaround times, three weeks with us versus six to eight to 10 weeks with others. Full product scope, so across the full range of medicines. We're a one-stop shop. We can do all of it. There's also value-add services such as procurement. We're seeing a lot of our clients come to us to source the raw materials, whereas historically, they were sourcing their own. We're now also in a position where we can extend working capital and payment terms to help our clients grow, and we've seen that with several of the clients who have really grown quite rapidly with our platform, using our platform, and there's many benefits. Yeah.
Okay. I don't know, maybe Jason or Sam, whichever one wants to take this. What sort of peptides are you looking at specifically?
Three or four. We won't get into the details too much, but we're looking at, there's one which has been approved, so gone through full trials in a certain market, but not yet in Western markets. We're looking at any peptide that's aligned with our existing clinical indication list. Medically-focused peptides. We're not looking at health, wellness, potentially longevity, but more what we would consider more medically inclined peptide medicines.
We've got another question here, and I'm not sure what this number relates to, "How quickly can you scale up in the U.K., i.e. hit AUD 150 million?" I presume that's manufacturing capacity they're talking about.
Yeah, that's manufacturing capacity. Actually, from the initial plan, we've extended the scope, and we're investing more into the U.K. facility. Originally, because one arm of the U.K. regulators are not positive around pastilles, but then the other arm are fine with it. We initially didn't include pastilles in the scope. In the last few months, we've now included to add on manufacturing capabilities for pastilles because we know it's possible, and it is allowed. That capacity should be, once we're finished in December and licensed, that will be the starting capacity, and there is some room to extend that with some further capital investment into the site.
Yeah. Another question just on target markets, why the target markets you have chosen, and why places like Canada, the U.S., Asia, are not on the list of target markets.
That's a good question.
Target markets-
The-
Yeah, go for it.
Sorry, Sam. I was going to say, the target markets that we are focusing on are the highly regulated medicinal markets. The U.S. is recreational, albeit every state's operating under different regulatory frameworks. Some states, it's illegal. Some states, you can buy it on the street corner, it's all fine. Canada is primarily a recreational market. The reason why we're focusing into the Latin American markets is that those countries, they require the product to be made by a medicinal GMP facility, and those facilities aren't available out of the U.S. The U.S., you actually can't even import or export from. It's a closed market. The Canadian market or the Canadian manufacturers don't meet the requirements for the Latin American supply. Every market's got different regulatory hurdles and frameworks, and we fit into the vast majority of the world's requirements.
One final question, if I can squeeze it in, because I know Sam has to go bang on the hour here. Seasonality between first half, second half, is there anything that people need to keep in mind?
If we can flip back to that revenue chart. The third quarter of the financial year typically has a little bit of a dip because of New Year, Christmas, New Year, and two weeks of January being missed. We've actually seemed to have normalized through that in the most recent Q3. I think the international side of the business now expanding and growing will completely get rid of that seasonality. Not so much, no. The revenues in this industry are very sticky. Patients typically do have repeat prescriptions, and they're getting their prescription every four to six weeks. They keep coming back, which is great. We see that with clients. To Jason's point earlier, the risk and cost for our clients, the clinics, of losing a patient, being out of stock would cause that. It's too risky and too costly.
We often see very accurate and long-term forecasting and planning, which makes our lives a lot easier managing the manufacturing.
Perfect. Sam, Jason, we leave it there because I do know Sam has to catch a flight, so I don't want to delay him. Thank you very much for joining us here on "Unlock The Stock," or sorry, "Coffee Microcaps" I should say. We will hopefully have you back in at some point later in maybe 2026.
Sounds good. Thanks, Mark.
Thank you, everybody. Bye-bye.
Thanks, Sam. Thanks, Jason. I know our second presenter is waiting in the wings there. There he is. Dennison Hambling, welcome back to "Coffee Microcaps.
Good day. How are you doing?
Very well, Dennison. If you want to bring your slide deck up, Dennison, I'll let you know once I see it.
Yeah. Any chance you can see that?
Not yet.
All right.
Hold on. Maybe it's loading. No.
That's what I thought, yeah. I'll just have to pop over there.
Yeah. It's coming now, Dennison.
Yeah. Perfect.
Yeah. If you want to go to present view. Yeah, there we go. Perfect.
Perfect
just go back to the cover slide. There we go. Thank you very much, Dennison. You can take it away whenever you're ready.
Great. Thanks very much, Mark, and thanks everyone for your time. We'll move through fairly quickly today. The point of today's update really was just to, I guess, re-highlight and reacquaint the market and our investors with the acquisition that we announced in December last year, which we settled this week, and I'm very excited about. I'd like to just step through those again and probably be able to, now that we own them, give a bit more color about the point and rationale behind that and what we've really bought. The overview today is that we settled the acquisition of Wormald New Zealand and Red Wolf end of last week on Friday. They are material acquisitions for us, very material in New Zealand, but also material for the group. They had the effect of really increasing our end-to-end New Zealand market commercial exposure, which we'll talk through.
The transaction was funded through drawing down our acquisition facility, which was an AUD 35 million facility. The final price ergo was AUD 37 million. A little bit of cash there, but not much. You'll recall also that we raised money after announcing this event. We'll step through the balance sheet shortly. It's added two leading businesses in the space, I think that's really the important thing that we want to highlight. We have had to build this business over time, I think what is really exciting for us is that we are now increasingly have been, I guess, for some time, being able to acquire really great businesses and great brands that we're adding to. Both of these are very well established in the New Zealand market.
I think the most interesting point was, until today, or at least until last Friday, we weren't able to highlight that the actual name of the business in New Zealand we bought is Wormald New Zealand. We were having to refer to it as Tyco New Zealand under the prior owner's instruction until we actually had it under our ownership, which we'll talk about the business a bit more widely in a second. The effect of the acquisition is to take our New Zealand footprint to over 500+ staff. It also gives us a complete end-to-end coverage of New Zealand. Which as we have moved through the IMG journey, have come to understand the importance of that, particularly for large customers and large national scale customers, which is really where we're focused on driving the business, and have been focused on driving the business.
Put all together, our business is trading to budget, we're on track to deliver a pro forma EPS. I say pro forma being a full year of these acquisitions in our books of at least AUD 0.062 per share. It puts us in a great position of profitability for us to keep building our business. A little bit about the two businesses, a little more granularity. Again, the Wormald name is just an incredibly strong presence in the New Zealand and Australian market. We own the New Zealand business, just to be clear, and we don't have or touch the Australian business. The brand is actually the same. It's a shared brand between the two organizations now. That brand, though, started in New Zealand in 1896.
For those in Australia, if you liken an Elders rural type of brand, that's the equivalent in the New Zealand ecosystem and commercial world. It offers end-to-end service. It essentially looks after fire suppression. Our estimation is that Wormald looks after about 28% of commercial buildings in New Zealand. Where you go in and there's a fire suppression system, Wormald Services maintains, upgrades, looks after those. As you might imagine from that, it's a very recurrent service-based business with long track record, and contracted, stable customer base. The other point to note about that market share is it's probably about twice the size of the next biggest competitor. That is a leading position, not just a great name, but also a leading position.
Really, the goal for us with Wormald is, like we've done also with ADT on the security side, is to make Wormald great again. Putting it back into more focused ownership hands. It had been tucked up inside a global Fortune 300 multinational who probably hadn't at a group-wide level, had any sort of touch or feel or even understanding of this business tucked up down the bottom of the world. Now it's into much more focused hands with local management who are enabled to actually start to move this business forward again. It's worth noting that in the history of Wormald, again, because it's been around so long, at one point in time it had 70% market share. To make Wormald great again, there is still plenty of room for us to go.
The other business that we bought in, so effectively Tyco New Zealand was two standalone operations, was Red Wolf Security or high-level security, as we've got here. Red Wolf is another business that's been around for some time. It was founded in Wellington, New Zealand, 2005. What makes Red Wolf really exciting for us is it specializes in high-level security or high security, as we'd call it in Australia. High security is a different standard, again, of commercial and enterprise security. It's the security. It's typically done by a distinct certification. It has its own certification. There's very few providers, and they provide services like looking after military establishments, a lot of government work. For Red Wolf, the Ministry of Foreign Affairs for New Zealand is its key customer. It's a 10-year contract, looking after all the embassies' security access control around the world.
That's really exciting for us, because it's a great business. We've got a lot of respect for the team there. Also, probably largely forgotten, I won't say unloved, but tucked away in Wellington, from a JCI point of view, security has been increasingly less of a focus for that overall business. I think in our hands, there's a lot of growth in that industry. We've got a leading player who's very keen with a great team prepared to grow. The interesting part for us is that as IMG has taken the journey on commercial security, having Red Wolf aligns very closely with our commercial enterprise strategy in Australia. The cross-leverage of these close teams and the respect they have for each other and the common technology platforms that we use is very leverageable. Really excited to have the Red Wolf guys in.
Again, just to step back, the rationale for both was a couple of, I guess, major points. One was just to reinforce our higher value focus in positioning. We're trying to be the leading service provider in our space, in Australasia. For us, in New Zealand, we now have the strongest fire and security platform. We need to keep investing in these businesses. They can be stronger, they can be more preeminent, and they can do more things for their customers. The platform is set now, and strong, wide, and highly recognized. It's added range to our business. Fire is part of our life safety strategy for the group. Effectively, we offer monitoring and associated services around life safety. Whether that's on the security side and proactive security with our video solutions, or on the fire side, keeping people safe in extreme fire environments.
It's extending an additional highly serviced, highly recurrent technical service business that we can invest in and invest in the people. It is stable, so it's added contracted customers. I think in the New Zealand case specifically, what having Wormald will do, and as hopefully the Wormald team see what we're doing on the security side, accessing that large pool of commercial buildings where we're already turning up and servicing and being able to show them the proactive results we're having on security, which are highly differentiated and successful compared to the traditional electronic security world. Gives them a chance to hopefully fast-track that up-sale and discussion with premise owners and building owners. I think that's a very exciting thing we'll be looking to build out into over the next couple of years in New Zealand. Then obviously it's financially successful. It's accretive for us.
Our balance sheet has remained in strong shape, and it's adding just over 20% accretion to earnings. Noting that the share price today is around the same share price it was that we raised money at. We're really keen for people to understand the positive impact that this has. Again, on the financial side, material acquisition, material accretion, EBITDA in AU dollar terms. The New Zealand AU dollar has moved around a bit, and I think that is a call-out we would make. I'm not sure how many other companies in Australia have a New Zealand component of any significance. Prior to about six months ago, the last three years has been flat. There's been quite a marked change in those currencies, which is putting translation pressure on the AU dollar to New Zealand cross.
It's going to add about AUD 10 million of earnings, NZD 11 million. It was very opportunistic, post that, it puts us with a business of a pro forma EBITDA in that sort of AUD 53 million-AUD 57 million range. As we're looking into 2027, that forms a base for us. As we get close to the end of this financial year, fully funded debt facilities, which are sitting nicely in the middle of our target gearing range at 1.6x net debt to pro forma EBITDA, with that strong EPS accretion and very strong EPS base as those earnings start to come through our P&L of north of AUD 0.0625. With those businesses in the kit now, it's good just to kind of step back quickly, refresh the IMG story.
There's a couple of turns to our story, for those that don't know, and assuming a few of you that will be listening will know us and the story quite well. We started with a business that was in a fragmented, sort of unloved industry back in 2020. We invested into a business that was problematic. We invested into the business with a new operating platform, which allowed us to start to look at value-added services. The monitoring platform forms the base of our business. It allows us to essentially sell what would've been called IoT type of services when that was a bit more flashy a few years ago. Really, IoT focused on security being our big vertical, but also now fire is something that we are leaning into.
We monitor most of the fire customers that Wormald looks after. From there, it's really been a journey of adding the technical services capability to help drive back onto that monitoring growth platform. This year, in 2026, the big piece being this move opportunistically into the fire space. As we now look forward, the platform is set in Australia around security. It's very set in New Zealand around both fire and security and giving that really strong commercial footprint. We're looking now to drive the use of the technologies and the investment that we've made over years into strong growth, and on the security side and perimeter security in particular. Today, what it leaves us with is with a strong business. We've got a strong profile. We make good quality cash and profit.
It's highly recurrent, at least 57% of our revenue each year is recurring, whether that's monitoring or service. We're scaled. We would have the largest consolidation of monitored customers in the security space, and fire space in Australasia. We've got a really dedicated and successful skilled workforce of effectively technicians and service people and engineers who enable us to put these platforms out to work. It leaves us today with a reasonable market value of about AUD 250 million. Moving out of the micro-cap land, a bit more into the micro land, pushing up into the small-cap land, but with a very institutionally owned base, too. We have about 65% of our register owned by institutions, and the rest mums and dads and staff. The business has four key areas. There's the ADT business, which is the direct security business, Australia, New Zealand.
Signature Security in Australia is our partner business now adding Wormald, which is our direct fire business in New Zealand. Just for want of explaining it to you visually, ADT New Zealand and Wormald New Zealand operate in the same building in Auckland. The operational center is literally the same building. There's only a couple of other people in that building doing some other things for JCI. They are actually not integrated, but tightly associated already. Very simple situation for us to manage. The IMS building, which is our traditional, our starting business, which was our wholesale security monitoring business.
Our direct coverage, which I think is one of our big strategic advantages now is if you're a large customer who wants serious and high-quality service provision, be that a data center through to a retailer, through to a large mining company, through to the government, then there's very few one throat to choke type providers. That's what we have built with our technical service coverage base, backed up with our monitoring centers or our response centers, of which we have four. Three in Australia, not all in the center of Australia, but just put there to hide their locations, and one in New Zealand for likewise, for the same reason. Turning to growth and who we are and what we're trying to do. We've got a very clear vision. We are here to be the leader.
We're here to become and be the leader in security and life security-related services for businesses, homes, families, and individuals. We're going to do that by providing a really great service at a good price, and being open and have access to, which we do by virtue of our scale, the latest and best technology available anywhere. The values of our organization for the people, something investors don't tend to focus too much on, but are really important if we want to build this to be a leader in an enduring business. We're very focused on getting behaviors, cultural alignment across the business that we have today and going forward. From a corporate strategy point of view, what are we really doing?
We started off by investing in our monitoring platform and then our people, and then we used our unique scale as we've been building it, which is allowing us to open up some competitive advantages. It's allowing us to be a unique provider, which is allowing us to grow our profit, which is allowing us to start to hopefully create a flywheel, which will continue to separate us from our peer group and make us move into that full and clear leadership position for the services that we offer. The two engines that really drive that are this focus that we have on using that footprint and skill base to drive our enterprise and commercial security and fire technical services. Because we can reach everywhere, we are hopefully and will remain and become even further, a unique valued customer, and provider to enterprise and commercial customers.
We are reporting really good results. It's really heartening that that strategy, the more and more we dig into it, the more we become known to our target customer base. That's working. I don't have the exact number, but I remember looking recently, I think we probably work for about nearly 30 of the top 50 biggest companies in Australia now. It's about deepening those relationships. It's about picking up more of them and about spreading ourselves around. It's still early. It doesn't imply that we're done. It just implies that we're making success. The other side is using our leading security and IoT monitoring platform to really drive these high value-added security services into premises in Australia. We talk about premises rather than resi or commercial. Essentially anyone that wants a property to be proactively monitored.
We now have caught over 60 criminals with the police this year off our proactive service, which is new to Australia. We're on probably around 1,000 sites now, starting at zero, going back only 12, 18 months ago. We're deterring far more crime than that, and so it's highly effective. We're looking to bring that to market in a scalable fashion using our technical base to keep people safe, which is exciting. Last couple of points is, it's an attractive business. As I made the point, it's highly recurrent. It starts with, I guess, ends with monitoring. Once you have our services installed and looked after, that 24-hour a day, 365-day a year services. You need your doors to work and understand who's coming and going through them.
You need your monitoring to be monitoring who's coming and going, and fire, you need those suppression systems to never fail. Service monitoring, service maintenance, then moving into upgrades and new customers and expansion and technology and all those things makes for a very long customer life cycle. Frankly, the shortest life cycle is home security, which again, we focus on premises rather than necessarily any particular type, but is at about seven to eight years average life. Whereas commercial and enterprise, we've got customers that have been with either the existing businesses or the ADT businesses for 15, 20 years plus. Once you have a customer and if you look after them, they're highly recurrent, and likely to stay with you for a long time. As I've said through this, what have we done?
These acquisitions hopefully will speak to reach. Our competitive advantages are few but serious. Reach is really important. Reach with our own people who are trained, who know what they're doing, who can deliver these results and solutions 365 days a year. Trust. Making sure we use our scale to lead with certification, reliability, that fallover, failover type infrastructure. We are the only A1-R1A monitoring company in Australia. That means we run two rooms concurrently. One falls over, nothing changes. We are there 24 hours a day, 365 days a year regardless. Then finally, the actual solutions themselves. Again, scale continues to make it clear to us that we can lead.
It gives us good pricing, but it also gives us access to leading technology, and it's our job through our cultural values to stay on top of it and actually deliver and bring these to market for our customers. Turning to the net effect of all of these, and I'll wrap up some questions if there are any. Reiterating, I guess, guidance. Prior to these acquisitions, we had underlying EBITDA guidance for the year. Here we're just adding in the pro forma effect of these acquisitions, which have settled, which are ours now, to give people a bit of a base to work off when they think about valuation for us, and the profitability of the business we have today, as we move forward. I'll finally wrap that up with a bit of a just a step back in the past here. We just build up.
Some of this is just for, I guess, internally and for me to remind us of where we've been. We really started this journey properly in about 2021, 2022, after we'd done the hard yards of getting the technology in place. In that time, we've de-levered the business, we've improved profitability, we've absolutely improved quality and outcome. We trade today at one of, if not towards the lower end of our EBITDA range in that time. Certainly, again, focusing more importantly now on EPS, at a pretty undemanding multiple relative to the market and relative to our comp cos globally. That's not mine to control. That's for others to worry about. I'll pause there, Mark, and see if there's any questions. Hopefully, that wasn't too fast.
Thanks, Dennison. Yeah, there are a couple of questions, a few were emailed in for people who want to watch it back on YouTube. They couldn't unfortunately join us this afternoon. I'm going to start with one of those. FY 2027, will it be a year of organic growth without any significant M&A? In other words, will we be able to clearly see the underlying organic growth in the business, is the question.
We have been growing underlying organic growth at about 8% per annum for the last three halves that we've been calling it out and reporting it. The way we calculated organic growth is what would the growth have been in the businesses that we would have owned for 12 months. I guess one of the reasons I say it that way is because the businesses we've bought have grown after we've bought them as well. We see that as the organic growth platform. What we've been looking to do is put together a platform and a market position and a solution set and a skill base that allows us to hopefully accelerate that. We're very focused on seeing that organic growth rate pick up. In that regard, I'd call out the two lead indicators that we talk to quarterly.
We had 27% quarter-on-quarter commercial growth, in the last quarter just released, in May. We had 16% Q3-on-Q2 growth of the ADT Guard, a live video monitoring product. That should start to translate through, as we move forward into organic growth accelerating. I think the point being made in the question is that we've had to walk and chew gum as we've done this journey. We weren't blessed with a clean skin. I wasn't able to raise AUD 1 billion and start with nothing and build it up. We've had to assemble the assets and the people to do it. Sadly, that does come with noise for those that love to forensically investigate accounts, and I can understand that, but it is the journey that we've had to be on. Inside of that, further complicating is we've been investing in the business.
Just to be clear to anyone that's interested in us, we're here to build an enduringly good business, not to hit a quarter number for anybody's peace of mind around what we're doing. It makes it challenging. Certainly with this now landing this side of the financial year, it does set us up for a clean year next year, which I appreciate is helpful, and I do understand that. As I say, it's more of an output for us though than an input. Our metric has been from day one, again, given we had to start with turnaround, was are we making good business decisions, and are we seeing them come through? We're really comfortable with that. They will come out and are coming out the other side.
Before I go back to the email questions, I want to take one or two from the audience here. Post this Wormald acquisition, what's the latest plan on ADT Care? Previously announced a strategic review they still ongoing with that segment? Maybe just give us an update there, Dennison, if you would.
No. Look, really fair question because we haven't publicly put out, I guess, an announcement about it. The outcome, though, part of the reason that I made it a public discussion was because there was an ongoing discussion that could be had with the major underwriting customer of the care business in New Zealand. That was the New Zealand government. We have had a very good meeting of the minds, and the average price of our new additional customers, so not our base of business, so you won't see this impact earnings today materially. As we move forward, we've improved the average price in our New Zealand care business for a new install by 28%. That will start to flow through and pull up those economics, and fundamentally what we were calling out was it was our lowest returning business on return of capital.
Had some really attractive dynamics, but we were questioning whether if those prices and returns were maintained, whether it was the best use of our capital or shareholders' capital, all of our capital. Post that price change, we feel heartened that it is actually a good business and now very keen to work closely with our counterparty being the government there. What I'm excited about having gone through that, some strong and difficult conversations for a period there to get alignment, is the New Zealand Government is actually very focused on delivering effectively efficiency in the health chain, and technology can be used much more efficiently inside people's homes as they age. The technology kind of exists today, but it's not being applied.
To be blunt, with the right relationships, we can probably help New Zealanders, New Zealand government, and in as to Australia too, if we had enough common ability to get the governments together to actually really improve outcomes and improve returns. Now it may move into a growth phase. With us, we did have discussions around potentially selling that business. I was very heartened with the interest that we received. When we looked at the growth potential and the returns that we can now generate, we feel that it's better to stay with us, and set the New Zealand business up with a strong platform then. I think that the secondary part of that, though, is that we have determined not to drive that directly in Australia. The settings aren't the same, sadly, in Australia. Just to be clear, I have a New Zealand accent.
I'm an Australian citizen. I'm an Australian and New Zealand citizen. 70% of our business is actually Australia. That has been our engine. We've just simply set up a platform in New Zealand now with this acquisition. I did get one shareholder question whether we did this for my own personal benefits. I can assure you that isn't the case. What we've learned, though, is that care environment in Australia is different. We do need to see some real change, and I think it speaks to a lot of the wider things going on in Australia. There's some huge opportunities for better results and outcomes, as we all probably feel, but we're not there yet, in the setup and the government and institutions to deliver it. We'll watch that, but we're not likely to be doing anything there.
Another email one. As the inherent cash flow and business improves, is there a consideration of capital management for shareholders, dividend commencement, buybacks? Just a quick
Yep
touch on capital management.
No, for sure. Again, if they take the line that the aspiration goal here is to create an enduring business, that is absolutely part of it. Personally, I would love to see that too as a shareholder. Look, we're really just coming out now of the phase. We had to refinance the debt. We've obviously had opportunity. This transaction is a good example of that in that what we have found is the more we have seasoned in this industry, bear in mind I've only been in it now five years, but it is only five years, that the deeper we've got, the more we've moved into a leadership position, the more we have to consider. Now, I think we've fleshed out our boundaries and what we are, and I'm not making a call for capital here.
I'm just saying that we've sort of had to go through a process as we've built this business about who we are. We've had a lot of tax losses and no franking, so dividends haven't been something that we've actively considered as much because they weren't tax efficient. Buybacks would be your go-to. This transaction is a for instance. At 4x EBITDA, which is the highest price we have paid, and I don't want to pay and won't pay above those sort of multiples. For an outstanding business, particularly in both Wormald and Red Wolf, frankly, given our trading multiples, they are accretive. We are still focused on building a business as a first point.
Yes, we are starting to generate cash, and I can see an environment where we will generate more cash than frankly we really need now that the strategy and the foundations are in place. The short answer is yes, but we are still, I suppose just giving it a bit of time to work it out. What we are working on, probably more importantly, is a three-year plan, and I'm a little bit TBD just in terms of date as to when we'll come out. Our intention is some time in the next few months to come out and actually put a clear three-year plan down for the market and for our investors and potential investors to mark us against.
As part of that, I think we'll be able to start to put a framework in place around what you'd reasonably expect us to do or how you'd expect us to use capital for everybody, for shareholders.
Yeah. Perfect. Dennison, unfortunately, we're out of time, so we're going to leave it there.
All right. Thank you.
to apologies.
No
Still a few others I didn't get to your question. We are out of time unfortunately.
I'll just say if anybody has-
No doubt we will have Dennison back with us again.
For sure. Anybody that does have queries, if you'd like to follow up, Shaneen, who is our head of digital intelligence, is now officially full-time IR as well, so I'm sure she's very happy to take any questions you might have. Her details are on the packs. Please feel free to reach out to her, and we're happy to answer any questions anybody has. Good, bad, or indifferent.
Okay. Perfect. Thank you, Dennison.
Great. Thank you. Cheers, guys. Thank you, everyone.
We will hand over now to our final presenter of the morning, or the afternoon I should say. I'm delighted to welcome Andrew Coleman from Teaminvest Private Group, joining us for the very first time, similar to our first presenters this afternoon with two new names to the Coffee Microcaps audience here. Andrew, very welcome.
Thank you very much. I am appropriately accoutred for it. Mark and everyone, look, I thought maybe it's just worth going through a few quick slides about who we are and then really more just a general discussion, because I think that's probably more valuable. Certainly when I'm in your shoes as an investor, that's definitely what I prefer to spend my time on. If you just bear with me one second, and I'll just share that for you.
Yeah. It's running now, Andrew.
Hopefully you can all see that. There you go. Is that now showing on screen?
It is. I can see I'm not sure if this is a cover slide. Slide three of 10 in this deck, but it is up here.
Yep. Perfect. Excellent. I'll just talk to a couple of the slides. I won't do the whole thing. The announcement's on the market from a few months ago, so from that point of view, anyone's welcome to dig into it. I thought it's useful just to start with who we are as TIP. We're an ASX-listed investment house focused on compounding knowledge and wealth, and really at our core, we believe that education and research is the foundation of all good decisions in life, whether they are business decisions or your personal decisions. That education and research throws up some actionable insights that you can put into practical application, and then if you're smart and you work out how to capture the knowledge from that, you can spin that flywheel really fast by delivering iterative improvements.
In other words, taking the knowledge that you've learnt from putting something into practice, running it back through education and research, generating higher and higher returns from your insights. That's what we've been doing since we were started. Originally, of course, spun out of some research from University of New South Wales in the investment education space, and these days operating a much broader business across three verticals, each of which puts that little diagram into practice every day using proprietary research-driven insights to materially increase the returns for our clients, and therefore the returns for our shareholders. Our three divisions today, we have an education and advice division, which is about as simple as it sounds. It's where we advise others in investment banking, consulting, and high net wealth and institutional advisory services, mostly around investing of course.
We've got a 25-year track record there of delivering material outperformance to our clients, with about AUD 1.6 billion under advice. Our second vertical is the funds management business, where pretty simply, we put people's capital to work for them. Often those are clients originally of our education and advice business who then turn around and say, "Look, we'd prefer you to manage it for us rather than just advise us." As of February, or sorry, as at the end of December when this was last published with updated numbers, we had about AUD 270 million in funds under management in that division, with approximately 250 basis points per annum outperformance for over 10 years now.
Our third division, which derives the majority of our revenue and profit these days, is our own balance sheet, where we effectively deploy our own capital in strategic investments, both minority and majority, in private companies, old school private equity that we've been doing now since 2012, and public equities that we've of course been doing for those 25 years. Today, we have about AUD 133 million deployed in that area of the business, generating a 3.1x average money on invested capital. Which really just means that over the course of our investment horizon, we've received AUD 3.10 back for every dollar we've deployed on average. Of course, that includes some very big wins, some not so great returns, but overall, it's averaged out as about AUD 3.10 back for every dollar we've deployed.
In terms of the half that's just been, because that's the most recent thing to talk about, we delivered again another really good revenue and profit, and our passive portfolio has grown now to AUD 18 million. The main thing I just want to call out, because it's something that I think is not particularly well understood about our business, is the very high cash conversion ratio. If you notice there, we actually delivered in the half a 272% cash conversion ratio. In other words, we brought back cash worth AUD 2.70 for every dollar of profit we're disclosing to the market. That's pretty standard for us. Maybe not the full 270, but that our cash conversion ratio is materially above 100%, because the nature of the accounting standards effectively mean that most of our profit doesn't get recognized in the P&L.
It comes through other metrics on the cash flow and balance sheet. As a result, we're able to make materially more investments every year than you would think a business of our size could. I'll just call that out, because if you have a look at this, over the last 12 months, we've been able to generate over AUD 10 million of operating cash flow, which we were then able to deploy back as AUD 7.1 million of growth CapEx and new investments, AUD 2.8 million of investments sold during the year, and return another AUD 1.1 million of cash back to our shareholders.
From that point of view, we're a very cash generative business, and it's the reason I often get asked the question, which is that despite being primarily a private equity firm and having listed in 2019, we have yet to tap our shareholders for money since being on the ASX. In that sense, we're quite a boring ASX-listed company. We went to the primary markets with a compliance-only listing because we didn't need cash. We wanted the flexibility of being listed. We've only returned capital to shareholders since. We've never tapped their wallet. That's obviously both a big strength of our business and it also potentially is a weakness because it means that we aren't in the face of brokers and the market all the time being able to spruik our share price.
As a result, obviously, our share price is now at about a 60% discount to our book value, despite having grown at EBITDA at 45% per annum over the period FY 2017 to FY 2025. I think that's all I just wanted to call out in advance before doing some Q&A. One other thing that you may notice if you've been following us is we recently just announced an acquisition or potential acquisition of Intelligent Investor from InvestSMART Group. The reason we've done that, as you can imagine with our three verticals, is it adds a material retail distribution front end to our funds management and advice business. Alan Kohler, John Addis, Nathan Bell, and the team there at Intelligent Investor have built a wonderful business over the last 30 years, teaching people how to be good value investors, whether that's in public or private markets.
That aligns exactly with our ethos of education and advice, spinning into insights, putting them into practice, and delivering returns. We're really excited to be welcoming them to the group. We expect the transaction will be materially accretive because obviously as investors, otherwise, why would we be doing it? It will effectively double the size of our funds management business from a funds under management point of view, and similarly, revenue and profit in that end of the business. We're quite excited about it. Mark, I think that's probably all I really can say today. Really to sum it up, we're a boring fund business that generates a lot of cash, and we return that to shareholders while continuing to grow. That probably makes me a little bit of a boring speaker, but I think it makes us a very good investment.
Yeah. Thanks very much, Andrew. Just maybe we will start where you ended after with the Intelligent Investor acquisition, given it is the most recent piece of news flow. As you said there, doubles the fund under management there. Maybe just the long-term strategy within that segment of the business. Do you want to get to AUD 1 billion as kind of the first medium-term target, and how does that come about? Is it through an organic growth strategy now with, as you said, retail distribution piece that comes with Intelligent Investor, or is there more acquisitions you would like to do, and what would those look like?
Well, I think, let me start by saying we have a private equity arm.
Apologies. That's probably about a three-part question said in one question.
No, that's great. I like detailed questions. That's my brain as an ex-researcher, right? Look, I think firstly, we have a large part of our business that's a private equity background. We're always on the lookout for acquisitions. I think once we've bedded down Intelligent Investor, it's only logical that we will bolt on other similar things, because that's what we've been doing for the last 20 years, right, since we sort of started as a business. In terms of the investment strategy, from our point of view, specifically around Intelligent Investor, look, we think it's a wonderful asset that has significant growth in it by itself. If you look at how that business has been run, it's delivered some really wonderful content for about 25 years to Australians.
I think probably many of us have subscribed to the Eureka Report and Intelligent Investor over the years. I know I certainly did as a junior as well as through to this day. What they obviously haven't been able to do because of the scale of the operation was materially expand its footprint, both through marketing direct to consumer here in Australia and also moving to geographic spread of what it covers. One of the things that I think is very logical, if you look at where we research and cover, we're a global research operation in our education and advice business. We cover Australia, New Zealand, U.S., Europe, and I think it's 48 global markets. There's a huge opportunity for us to expand what is effectively an online business.
It's like you doing webinars and online research that can be broadly shared around into other markets. We're really excited about taking the wonderful insights of that team and growing it broadly. That applies both to the subscription side of the business, which is where people sign up to get those newsletters and broker recommendations, as well as the funds under management side, which are effectively four listed ETFs and therefore distributable pretty much anywhere around the world with the appropriate marketing and compliance structure. To your question around then the second part, which is where do we want to take it, I think a billion is the beginning. It's not going to get there in one giant leap. It's going to be a series of incremental steps. Our goal is to manage more and more wealth wisely for our clients.
From an operational scale point of view, it's no harder managing, as we found, AUD 100 million to AUD 10 million or AUD 200 million to AUD 100 million. I think that each time that extra zero gets added, it's just simply making bigger trades in the same companies we've already identified. Maybe some of the most micro caps become vast majority of such a scale that we could easily deploy many times what we currently deploy with very limited extra cost.
I do want to call it out because it's not too often we get Micro caps on here that do pay a dividend. You guys do pay a dividend fully franked. Maybe just a comment on what is the dividend policy, thoughts around capital management, given the discount to NTA.
Yeah. We've been doing a dividend since we listed. We've also been doing a buyback for quite a few years now. The advantage of having lots of cash is you get to choose how you deploy it. We've sort of all got all three boxes going at once. We are busy making new investments all the time to use our cash whilst paying dividends and doing a buyback. From a capital allocation point of view, we get the luxury of having a little bit of everything. I think the nature of our business is such that we are lucky that we have businesses that are cash flow generative. That's what we buy in both the private equity side and the public equity side. That lets us decide what's the best use of our capital at any time. We're very conscious. I'm a major shareholder.
My family and myself are about 20% of the register. The rest of our board and management team are another roughly similar amount. We're very conscious of the fact that we have material skin in the game. We would like a return on our capital invested as individuals, not just a company. That can come to us as either dividends or buybacks, and we've been doing that for a long time. At the same time, we don't want to do that and sacrifice growth. We, as a board, just look at it each half and say sort of, "What's available for growth based on what we see in the market right now, and any excess we're returning through either a buyback or a dividend," depending on what looks more attractive.
Mr. Chalmers may be having a say into which of those two becomes more attractive going forward.
Okay. Let's not open that Pandora's box. It's well outside the scope of this webinar. There's plenty of content flowing around for anybody who wants to go down that rabbit hole. I'm sure will continue for the next 12 months. I know you pointed to the discount to NTA. I'm just wondering, when people are looking at your business, do you think that's the best metric to look at, discount NTA, or should they think of you as an asset management business where you're trading on a price-earnings multiple or some kind of other multiple? People are trying to value the business. What do you feel is kind of the most reasonable kind of metric to apply to valuation of a business like yours?
Look, I would much prefer everyone used an earnings multiple because the number would be even higher than our NTA. I think genuinely, unless you're prepared to do work and research and understand what it is we do, using our NTA or our book equity, I'd use book equity because it's just simpler, as a simple proxy for our value is probably fair. The reason I say that, of course, is remember, we can only write down the value of our assets in private equity. We can never write them up from an accounting standard. Our book equity will always materially undervalue the value in use of what we own. For example, if we buy a private equity business for AUD 5 million or AUD 10 million, and it triples in value because it triples in size, I don't get to write it up on my books at all.
On the other hand, if I buy it for AUD 10 million and it turns out it wasn't a good idea, I can only write it down. From that point of view, our book equity, unlike in some other businesses, will always be on the conservative side of our true value. As a result, because I like to always encourage people to be a bit conservative. I think it's a very easy proxy to just quickly say, how do we look from an efficient market point of view? Obviously, if you can get us a 60% discount, I think that's like buying dollar bills for AUD 0.40. That's why I've been in the market buying our own stock. For me.
As somebody who was a qualified accountant at one time in the past, that standard that you're talking about there on writing up and writing down, I've always thought is one of the most ridiculous standards of all time. Anyway.
I think it makes sense if what you're trying to do is prevent another Enron, right? You don't want people to be able to value themselves up, so I can understand it, but it does create some weird problems when you are in the business of growing businesses.
Yeah. Of which we are going to see a classic example of now when the SpaceX IPO comes through. A lot of funds will have these crazy monthly numbers once the IPO actually hits the boards. If you're an investor, whether you're going in the month before or the month after, it's going to cause a lot of different problems. Anyway, we're getting very technical here. Another question. Can we just delve into the private equity business and just to give people a sense of industries you're looking at. Is it mid-market businesses, small, the whole theme that we see in the market of the boomer generation are looking to exit businesses now. There's no natural successors from the kind of next generation.
Maybe just talk to what is in that private equity book and kind of what is the sweet spot for businesses you are looking at in there?
Sure. We actually launched the private equity side in 2012 on exactly that thesis. The idea of the baby boomer generation has been the most entrepreneurial in history. Also at the time, research showed that over 70% of them hadn't considered what they were going to do for business longevity, either their own or the company that they owned. We thought there was a huge opportunity to get in there and effectively arbitrage the opportunity, which is we could come in and say, "Look, we want to provide a staged exit for you that preserves your legacy, materially unlocks value for you and your family, but also isn't selling to a competitor or a debt-laden business who then might destroy what you've built." That was quite personal to me because my father had been a serial entrepreneur.
In fact, I at the age of 13 had sold a business that was very important in the education space. It actually was the very first business to do self-study mathematics and language programs. Everything behind Duolingo and everything else comes from his original work. Had been bought by PE, run into the ground, and folded in about 18 months after purchase, despite having been 500 staff. It was a quite personal thing for me. We're all a product of our own experience. That is now quite a crowded trade. There's lots of other people who have since in the last sort of 15 years woken up to that opportunity.
What we've started to do is we still play a little bit in that space, but we're doing a lot more work now with younger generation managers who I joke have reached the level of their confidence, not competence. Effectively, they've built a wonderful niche business. They're now at that position where the funding and effort required to grow it is scary when they have young kids and a mortgage. Unfortunately, in Australia, most growth comes from bank funding that's secured against your home, and it's one thing to have a mortgage originally, it's another thing to remortgage the house when you've got young kids and you finally just got financial independence.
We're finding there's a big opportunity for us now in that space to come in and help those sort of 40-year-old owners who've grown to sort of between AUD 20 million and AUD 200 million revenue and are now saying, "Well, the next stage of growth is going to be scary for my family if I don't have a partner." I think that's just the next wave that we'll see coming through. We still have both in the portfolio. In terms of the industries, we are industry agnostic, but the majority of our portfolio is in two main categories, in services businesses where we have a material ability to leverage their growth through our structure, and in heavy engineering, where weirdly, in heavy engineering and manufacturing, we've had quite a lot of success. That's not my background originally.
It just happens to be a couple of our first investments were in that space and having built quite a good name for ourselves there, we've been able to do that again with a few others in similar industries. They're our two main parts of the portfolio.
Is that all domestically focused in Australia, or is it a international book or part of the international book?
Yeah, they're all businesses that are headquartered here and originally started here. Some of them have since expanded offshore. I'll call out in particular one that you may, and the people on this call may be interested in because it just highlights sometimes both the growth and the luck that comes in this business. We made an investment, 30% of a business called Multimedia Technology in the back end of 2018, beginning of 2019. MMT at the time was an importer and distributor of IT hardware, mostly audiovisual things, so webcams and a thing called graphics cards, which was important for gamers and people who wanted to make video. As a result, it came with an exclusive relationship at the time with a company some of you may have heard of, that's ticker is NVDA, NVIDIA, of course.
As a result, we've seen that grow materially and now expanding, to many more product lines and offshore. From that point of view, you do get some of those really great success stories in the portfolio. I think that's one the market hasn't talked about much about us. They still think of us in other ways. I think there's a lot of latent value there, as you can imagine, with the growth in AI and the sale of that. Then on the other side of the business, in terms of really boring but wonderful businesses, we own a business called East Coast Traffic Control that we purchased in 2015, that is literally people at the side of the road making sure you're safe with lollipops, stop signs, and slightly better technology these days.
That's grown sort of tenfold again under our leadership or sort of ownership. Those are the kind of businesses we like. It's businesses that have really strong fundamentals, a management team that have huge ability but need someone to help them unlock it, whether that's a case of some capital or whether it's some advice or a combination of the two.
Just to pick up on another theme in the market, related to private equity. We've seen a lot of private equity rolling over. I don't think you operate in a fund. It's more on your own book, but funds rolling over, coming up to natural dates, can't get the exit prices that they want because they maybe paid too much back in COVID craziness valuation times. Can we maybe just talk about the exit strategy for the private equity book? Is it you've kind of taken the business as far as you think you can under your leadership, and actually, it needs an even bigger partner now for the next ride or an attractive offer comes along and you're happy to let it go at a valuation that seems fair?
Yeah. We exit really for three reasons. The first is the one you pointed out, which is that the business will grow further without us than if we stay. Rather than being a roadblock to that growth, we'll exit then for that reason. If you treat people as your genuine partners in that operation, it's only fair to unshackle them. That's one reason we exit. The second reason we exit is it's just not working. Not everything works out, particularly when humans are involved. It's kind of like dating, right? You enter with the best of intentions, things can change over time. You're not always the same people and have the same priorities. We will exit if that happens. Thirdly, it's the opportunistic exit. Someone comes around with a check that's just larger than we think it's internally worth to us.
The business may be worth that, but not under our leadership, and so we'll exit. In terms of primarily, it's the first two categories, not the third. It's lovely when someone comes with a wonderful check, but that's rarer. It's usually because there's a strategic reason for the exit. We do have one big advantage, though, which you sort of touched on versus the traditional private equity fund. Because of a traditional private equity fund, you're taking capital from others and you're gearing that. You have very sort of hard and fast end dates that if the market doesn't play ball, can result in material value erosion.
One of the reasons we listed and we amalgamated everything onto our own balance sheet, which effectively means bought everyone out and put them under one structure, is so that we could control the timing of that exit because we'd seen in the first vintage of our funds that exactly that happens. You build this wonderful business together. You get to year five or seven, and suddenly you're in this exit process that just doesn't make strategic sense. You've got a whole bunch of growth ahead of you, or you should have exited in year three and now you're stuck. From that point of view, we wanted that flexibility, and we went down that path of putting it all on our balance sheet for that reason. I think that's a material advantage.
Sometimes people in the industry disagree with me, but I think that flexibility enables us to maximize the returns in a way that a traditional fund structure doesn't. I think that's why you see in our results that 3.1x MOIC, which is well above market standard for a PE group. That's, I think, just partly because we're getting to control when we exit. If your neighbors know when your house is about to sell, they'll underbid it compared to if you can choose the time to leave. From that point of view, I think it's a big advantage.
I don't think follow-on funds or secondary funds were as popular as they are now back in 2013, 2014, 2015. It's an innovation of the private equity sector, shall we say, that has seemed to have emerged in the last two or three years.
In my early banking days, I sat next to a very wonderful banker, they'll remain nameless for this point of view, he had a very good turn of phrase, and he coined in the middle of the GFC the lovely line of, "The rolling loan gathers no loss." I think you see that a lot in closed-end structures. They roll it to pretend the loss hasn't occurred. It's a dangerous game. It makes the manager a lot of money. It doesn't necessarily work so well if your money's tied up with them.
Yeah. No, exactly. Just maybe if we can take one final question on the private equity business. Looking backwards, looking forwards, the opportunity set now as you kind of look at it today, I know you're saying the cohort of businesses you're looking at has changed from those baby boomer exits to maybe the growth capital. In terms of that opportunity set, is it still presenting plenty of opportunities to put capital to work? Are vendor expectations out of line with kind of valuations you want to pay? Maybe just give us a sense of where that kind of market is at the minute?
It's interesting. When we started in the private equity side in 2012, it was pretty, well, easy to buy private businesses at 4x-7x earnings because there was a big value differential between public and private markets, and there weren't a lot of people playing. Over the last sort of 10, 15 years, that differential has reduced materially and private businesses have been bid up to numbers that just don't make a lot of sense to me. That is turning again. It's just the typical pendulum. There was all this cheap money flowing around, as you mentioned, in PE firms and others. They had to deploy them.
The problem with that five or seven-year structure is if you get the money on day one, you've got to deploy it quick, otherwise you run out of time to invest it, you overbid for the assets in auctions. It's that lovely old joke of the winner of the auction is the one who comes second. They basically overbid and overpaid for these assets. We sat on the sidelines and focused on deploying our capital mostly into the existing portfolio. We didn't stop spending, we just bought things for the existing portfolio and saw a lot of organic growth. In the last six months, I think everyone's noticed this if you've been watching the ASX and global markets, that bifurcation of valuations has started again in a good way for a company like us.
All those companies on stratospheric valuations have plummeted, and it's reset value expectations back to something more reasonable. You see that in our Intelligent Investor acquisition and others that we're making as bolt-ons recently, and I'm sure we'll make a few bigger ones as well. We want to buy in that sweet spot where we're buying a wonderful business at a reasonable price. We're not interested in getting into auctions when the market gets toppy. Downtimes, like perhaps we're going through now, that's our sweet spot and it's why we build a war chest. For those who cover us will know that we have a very large acquisition line that is currently untouched. We've paid off all our debt. That's very puzzling for a private equity firm.
If you look at it, you think, "Why are you a PE firm with not a single dollar of debt?" My answer is because we've been waiting to deploy it, and we're now starting to get excited about what we can deploy.
Just one last question, I'll just squeeze it in here. Obviously, the cost of debt funding for a lot of these PE firms has materially changed in the last three years. Has that lessened competition? Now you're looking at 10-year rates, plug that into it at over 4%, if we take the U.S. dollar one, and suddenly it doesn't, what their ability to pay doesn't kind of make as much sense anymore. They're not going to move away from having debt as part of the capital structure of these funds. Has competition also decreased, would you say, in the market?
Yeah, I think so. I think there are as many competitors as there were a year ago, but they don't have the cash to spend that they had a year ago, both because of the cost of debt rising materially, and that's a big one. Also, the cost of equity has risen. The idea of being an investor in PE and VC and being only too happy to know your portfolio is entirely loss-making in the hope that you can sell it to a bigger fool down the line is dying off again, as it should. Schumpeter referred to capitalism as the process of creative destruction, and there's been a lot of value destruction in those kind of firms, and that's lessening competition for the assets we want.
Just because, I joke all the time, if an asset's selling for AUD 1 million, there's a lot of bidders, and if an asset's worth AUD 1 billion, there's a lot of global bidders. When you're talking about sort of AUD 5 million-AUD 25 million, there's not a lot of individuals who can write that check and not a lot of global players who want to bother. From that point of view, as capital becomes more expensive, it really does, in our space in the market, materially reduce competition. From our point of view, having a big cash balance, a large cash generative portfolio, and untapped cash reserves, through debt reserves and others, that gives us some really strong dry powder to compete on the assets we want to compete.
Perfect. Andrew, we have slightly run over time. I apologize, but we'll leave it there. Thank you very much for joining us, and yeah, hopefully maybe we can have you back in after the full-year result.
Look forward to it. Thanks for having me.
Thanks, everyone. That concludes our webinar for this afternoon. Thanks, everyone, for joining us. Yeah, we'll be in touch with our next event as soon as we get a few companies lined up. Thank you. Have a good rest of your Monday.