HANSEN TECHNOLOGIES LIMITED — Regulatory Filings 2002

Nov 20, 2002

CHAIRMAN'S ADDRESS

ANNIAI GFNFRAI MFFTNG

21 November 2002

Ladies and gentlemen, welcome to the third annual general meeting of Hansen Technologies Limited.

The year to 30 June 2002 was a disappointing one for your company. I am confident, however, that - as we shall explain in more detail later - the results were but a temporary set-back in the 30-year growth of Hansen Technologies.

Performance for the year was adversely affected by a number of factors - some external; others of our own making.

Revenue, at \$46.3 million compared with \$55.7 million the previous year, suffered from the worldwide downturn in the telecommunications industry. This contributed to a reduction in EBITDA, or earnings before interest, tax, depreciation and amortisation, to \$2.4 million before write-downs, compared with \$12.0 million in the previous year. The result was a loss of \$5.9 million before tax and write-downs, compared with a profit of \$6.0 million in 2001.

As you will be aware, your directors took the decision to revalue the goodwill figure in the company's balance sheet, resulting in a \$52.8 million reduction in its carrying value. This, in turn, led to a reported loss of \$60.5 million for 2002, compared with a profit of \$3.0 million for 2001. As at 30 June 2002, the value of goodwill in the company's balance sheet was \$19.5 million.

An interim dividend of 1.0 cent per share, fully franked, was paid to shareholders in May 2002, but there was no final dividend.

I should like to explain the background to the goodwill revaluation. When we were preparing to list the Hansen business on the ASX in June 2000, we had to change its structure. This involved the creation of a new company, Hansen Technologies Limited, which acquired the Hansen business. Our initial advice was that, under the Australian Accounting Standards, no goodwill would be created as a result of the restructure.

By the time the prospectus was being finalised, however, the Standards had changed and we were required to include approximately \$71 million of goodwill in Hansen Technologies' balance sheet. The directors reviewed this figure at 30 June 2002 in the light of the global decline in the value of IT companies over the past two years and reduced spending by the telecommunications industry, and we decided it was appropriate to reduce goodwill by \$49.9 million.

We also wrote off \$2.9 million in goodwill related to our purchase of the SVi Group and reduced the value of SVi Group assets by \$2.2 million. This business, which we bought in January 2002, specialised in interconnect billing systems and its products were complementary to ours, but regrettably it failed to meet our expectations and we withdrew funding in August. Legal proceedings have been issued against Hansen by the vendor of SVi; these will be defended vigorously, and we have cross-claimed against the vendor. I am sure you will understand when I say that, as the matter is now before the courts, it would not be in shareholders' interest for me to say more.

I would like to emphasise that these revaluations are accounting adjustments and do not affect Hansen's cash reserves or business operations. The company's value at the time of the IPO was not affected by the inclusion of goodwill in the balance sheet; equally, the company's value at 30 June 2002 was not affected by the reduction in goodwill. Following the revaluations. Hansen's net assets at 30 June were \$31.0 million, representing 33.6 cents per share.

The results for the year, while unsatisfactory, do not reflect the potential of our core billing systems and IT outsourcing services businesses. Our growing international reputation, initially in the telecommunications sector and increasingly among utilities companies, has positioned these businesses to benefit strongly as our markets recover. At the same time we have refocused resources on our core businesses, rationalising operations which were unlikely to be cash flow positive in the medium term.

During the year, we expanded our operations and international presence with two significant acquisitions. Marotz Inc., which we bought in August 2001 and integrated with our existing US business, has opened up new opportunities for the company.

The revenue and profit of our expanded North American business were in line with our expectations a year ago, but lower than indicated at the half year due to accounting irregularities within that business. These irregularities, which became apparent during the audit, were announced to the stock exchange at the beginning of September, when we also made it clear that, as a result, an EBITDA forecast at the end of June would not be achieved. Decisive action was

taken to avoid a repetition, and the managing director will cover this in his presentation.

The other significant acquisition was of Syntegra's Australian IT outsourcing and facilities management business, which we bought from BT Group, formerly British Telecom, at the beginning of June 2002. The Syntegra business, now trading as Hansen Professional Services, has transformed our outsourcing operations, establishing Hansen in the middle tier of the facilities management market.

In January, we placed 11 million shares with institutions, raising \$12.3 million after expenses. Combined with shares issued under the interim dividend reinvestment plan, this increased the number of shares on issue by 15 per cent to 92.3 million at the end of the year.

In spite of the soft market, our set-back with SVi Group and our short-term accounting problem in North America, Hansen entered the new year in a strong position.

At the end of October we signed a five year contract to provide a Consumption Data Management and Metering system and ongoing outsourcing services to TXU in Victoria. This is particularly significant as it confirms the potential for Hansen's billing systems in the energy sector. Our experience in Australia, where derequlation and retail contestability are well advanced by world standards, is expected to open up considerable opportunities in other countries.

Hansen is a more focused company than a year ago, concentrating our energies on the growth of our billing systems and outsourcing services businesses. Both of these will provide a solid base on which we will continue to expand.

I will now ask Andrew Hansen, as managing director, to give you a more detailed view of 2002 and our prospects for 2003. First, however, I would like to thank him and his team for their determination and success in overcoming the challenges they have had to face in the past twelve months. It is their skills and commitment which enable us to look forward with confidence.

MANAGING DIRECTOR'S ADDRESS

ANNIAI GFNFRAI MFFTING

21 November 2002

Thank you Mr Chairman. I'd also like to take this opportunity to welcome you to Hansen's Annual General Meeting.

This year we decided to hold the meeting at our head office here in Doncaster. We have operated out of this location for the past 8 years. Our Grade A Data Centre is located in this purpose built building. It is from this facility that we host a number of mission critical systems for our clients, including HubFM - our outsourced billing service. Along with our other data centre in North Ryde, New South Wales, this facility forms the backbone of our IT outsourcing infrastructure.

While last year proved to be challenging on a number of fronts, Hansen has emerged as a more focused company. We have completed a review of our operations, and as a result, decided to focus on the core billing systems and IT outsourcing businesses, while reducing our exposure to our other activities. This will allow us to restore Hansen's profitability and create the base from which we can continue to expand.

Review of Operations

Billing Systems Software and Services

Revenue from our billing systems business was \$34.0 million, down from \$43.8 million in 2001. Earnings before the write-down of SVi assets and allocation of corporate overhead were \$2.7 million, compared with \$13.7 million in the previous year.

There were three factors that contributed to the reduction in revenue over the year:

• $1₁$ telecommunications companies globally reduced discretionary spending;
• $2¹$ a significant US customer, which subsequently filed for Chapter 11 bankruptcy protection, cut its spending; and
• 1. the expected decline in revenue from gas customers acquired as part of the EIS acquisition.

Also, earnings were negatively impacted by the performance of SVi.

The acquisition of Marotz in August 2001 has increased our presence in North America and Europe. The US operations were merged with our smaller US based business and renamed Hansen North America. We have already begun to see the benefits of our increased sales and marketing capability, particularly in North America.

Hansen North America's revenue contribution of \$5.8 million and profit after tax of \$0.3 million were in line with our initial expectations, although lower than expected at the half year due to accounting irregularities that overstated revenue and understated expenses. There has been a change of personnel in the Hansen North America accounting department and we are in the process of strengthening Hansen's internal processes in order to avoid a recurrence of these circumstances

We have also assigned a new general manager, Mike Slattery, to the US business. Mike comes to us with extensive executive management experience in the IT industry, including billing systems expertise in both telecommunications and energy markets.

Hansen also acquired the UK based DataTrue business in April 2002, which we have renamed Hansen DataTrue. While a relatively small acquisition, this business provides Hansen with proprietary billing systems software targeted at the tier 2 telecommunications market in the UK and Europe with an installed customer base. The acquisition also provides additional scale to our operations in the UK, and gives us a base closer to London.

As the Chairman has mentioned the winning of the TXU Consumption Data Management and Metering system contract in Victoria is significant for Hansen. Not only does it reaffirm our expertise in providing systems for deregulated energy markets, but it also highlights Hansen's ability to deliver quality mission critical systems within tight project time lines. I am delighted to report that the system has successfully gone live and is now in production, and our client is extremely pleased with the result.

IT Outsourcing Services

The IT outsourcing business contributed revenue of \$7.5 million and earnings of \$2.4 million for the period, an improvement on last year's revenue of \$5.3 million and earnings of \$1.8 million.

The result included one month's revenue contribution of \$1.6 million from Syntegra's Australian IT outsourcing business, which was acquired in June.

This business, renamed Hansen Professional Services, is a major step in the growth of Hansen, significantly enhancing the scope of our IT outsourcing business. It provides us with a second data centre in North Ryde and increases our presence in New South Wales, where we now have around 100 people.

The business has also expanded our industry expertise to include financial services, complementing our telecommunications and utilities experience. The merging of the business with our existing operations in Doncaster has improved our competitive position and enabled us to make considerable cost savings.

As a result of this integration, our IT outsourcing business will make a greater contribution to revenue and earnings in the current year. With long term contracts, stable revenue streams and strong cash flows, this business will provide an excellent platform for Hansen's growth over the medium term.

Other Activities

Our other activities during 2002 consisted of the staff rostering product RosterOn, the call centre productivity software ResourcePro, and the infrastructure and asset management software AssetLife. These businesses contributed revenue of \$3.7 million, down from \$5.9 million in 2001, and made a loss of \$0.3 million compared with a profit of \$2.2 million in the previous year.

During the course of last year we determined that we were not optimising the company's investment in RosterOn. In consultation with the management of that business, we agreed that an organisation predominantly focused on this product would be better placed to capitalise on its potential. In July of this year we entered into an exclusive software licence and distribution agreement with a company formed by the management of RosterOn. As a result we will receive royalties on sales, but will no longer fund the development and marketing of the product.

Following this restructure, and our decision to focus on our core businesses, contributions from our other activities will become less significant in the coming vears.

Outlook

Moving to the outlook for the current year, I am happy to report that our results for the first quarter are in line with budget. While market conditions in the IT industry are competitive, we believe that we are well placed to win new business, particularly in the utilities and financial services markets. Our recent success winning the TXU CDM and Metering contract in the Victorian energy market underscores our strong credentials in this area.

We have said that we expect revenue to exceed \$65 million in the current year. I would like to provide you with some detail on how we are tracking to this target. If we maintain the run rate achieved in the first quarter we will record revenue of around \$60 million in 2003. In order to realise our target, we need to maintain the first quarter run rate and, in addition, successfully close new business over the remainder of the year. While this will be a challenge in the current environment, we are confident of achieving both requirements given our sales pipeline.

While last year was one of the more difficult periods in Hansen's 30 year history, we have entered the new year in a stronger position. With our proprietary Hub billing system gaining increasing market acceptance and our stronger position in the IT outsourcing services market, we are confident of once again achieving revenue and earnings growth.

I would like take this opportunity to thank all Hansen employees for their efforts over the past year. It is through their commitment and shared vision that we can emerge from a difficult period to look forward to a better year. I would also like to welcome the team at Hansen Professional Services to our company, and thank them for their efforts in bringing together our outsourcing businesses in Doncaster and North Ryde.

That concludes my address, thank you for your attention and attendance today. The Chairman will now conduct the formal business of the meeting.