The Hansen 1H18 report due next February will be interesting! 1...

The Hansen 1H18 report due next February will be interesting!

1  Revenue FX impacts:

The revenue FX impact was +$7.9m (FY16) and -$8.7m (FY17), a turnaround of some -$16.6m.

The reported revenues were $149.0m (FY16) and $174.7m (FY17) ... or +17.3%.

However, removing FX impacts, the revenues were $141.1m (FY16) and $183.4m (FY17) ... or a much more reasonable +30%.

The 1H17 FX impact was -$4.4m.  Based on (a) FX trends for the first three months of 1H18 and (b) the estimated revenue shares by currency, I would expect the 1H18 FX impact to be around -$2m, with the difference (approx $2.4m) adding to the 1H18 revenue.

2 EBITDA Margin:

I note that the 'FY17 Results Investor Presentation' does not mention the usual Hansen aim to 'continue to target an EBITDA margin of 25% to 30%'.

All other things being equal, given (a) the Enoro acquisition forecast CY17 EBITDA margin of only 16.4% (Revenue of $55m and EBITDA of $9m) and (b) the Hansen FY17 EBITDA margin of only 25.8% (Revenue of $174.7m and EBITDA of $45.1m), I would expect the 1H18 EBITDA margin to fall below the 25% target.

3 Profitability:

On the other hand, the 'FY17 Results Investor Presentation' (p13) Outlook forecasts increased profitability in FY18 from (a) growth in underlying profitability and (b) positive earnings from Enoro (EPS accretive in the acquisition statement in Jul7, 2017).

So what are we to make of the above?

My guess is that, despite a strong 1H18 report, the market could react poorly if the EBITDA margin drops below 25%.

Previously, the market reacted poorly when the EBITDA margin dropped below 30% due to the impact of the Solutions low-margin call-centre business, despite adequate earlier warnings from Hansen.

Anyway, just my view.