Purchase of TechnologyOne (ASX: TNE)

20th May 2024

Across the Australian Equity component of investor portfolios (Growth Tilt), we have purchased TechnologyOne (ASX: TNE), a leading Australian technology company.

TNE offers Software as a Service (SaaS) business solutions with 16 products and over 400 modules situated on a leading cloud platform. TNE targets six key industries with Higher Education & Local Government comprising TNE’s largest customer base, offering products that target specific operational needs of these institutes. The business operates in both the APAC and UK market.

We are attracted to TechnologyOne for the following reasons:

Market leading on-cloud product suite for Enterprise clients
Strong management team with a track record of delivering results
Ability to earn a high return on reinvested earnings
Strong Balance Sheet

TechnologyOne has three key levers for value creation that we would like to highlight:

The business has scope to drive revenue growth from its existing customer base through cross-selling and upselling of products. The business has steadily increased its average product per customer over the last five-years and we believe this cross and up-selling will continue, aided by new product launches and a strong product platform;
TNE recently launched a new sales model, SaaS+, whereby the business does not charge customers an implementation fee in exchange for higher recurring contract fees. We believe this new model will help drive new customer wins and revenue growth, especially in the UK market.
The business also has the ability to drive margin expansion and, in turn, drive earnings growth. The new SaaS+ pricing model, alongside contract indexation, will support price gains per customer and, combined with increasing scale over fixed costs, help improve operating margins.

We have funded the purchase of TechnologyOne via the sale of WiseTech Global (ASX: WTC).

As always, thank you for your ongoing support, it is very much appreciated. If you have any questions or would like more information, please contact your adviser.

Warnings and disclosures

This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.