Intelligent Monitoring Group: Questions to Dennison Hambling | Value Bridge

Capital Allocation

03/09/2024 Is there scope for further acquisitions?

Yes, 100%. The industry is fragmented with a few large players who have underinvested or are pulling back, like ADT. After a decade of little consolidation, many smaller high-quality businesses exist, often owned by people nearing retirement or succession. We want to be seen as a good home for these businesses and work hard to integrate teams, offering long-term career opportunities. We are strategic and not a roll-up play. While we may do a lot of M&A, we are building a solid platform that could stand on its own without needing to raise money. Investors would be rewarded for that.

14/11/2024 How does the current strategy, including recent acquisitions and equity raising, fit with your previous statements about rollups, deleveraging, dividends, and buybacks?

I have said before that we are very aware of what a rollup implies, a company doing a bunch of acquisitions and blowing up, but we are not one of those. Our focus is on integrating and building a business with a clear purpose, structure, and growth plan. Delivering organic growth this year is important because it shows the businesses we've combined have added value, unlike just throwing businesses together. We have reduced leverage as planned, hitting all the targets we set during our recapitalization. There remains opportunity to add to the portfolio where it makes sense, but we won’t buy just for the sake of buying. The recent acquisitions have been less complex IT-wise and more people-focused, and we are working hard to bring teams together and create a consistent culture.

We generate strong cash flow and will use it accordingly. While we have many tax losses, which limit franking credits, this also means less cash outflow on taxes when we do generate profits, as losses offset taxable income. The board has not made decisions yet on capital initiatives like dividends or buybacks, but we do not need to deleverage further immediately and will continue to do so with cash flow. Franking credits won’t be a feature soon, but buybacks might be. After three years to reach this point, I’m focused on the next three years and see a path to potentially joining the ASX 300 if we choose. This is not about prestige but about providing professional service and gaining recognition. Scale and size benefit us, and while the word "rollup" triggers caution, we are committed to avoiding a messy business and ensuring solid results.

15/04/2025 How is IMG thinking about capital allocation and has the strategy changed since you became CEO?

When I took over, the primary focus was driving cash flow and cash returns, despite some accounting noise that may have obscured that. Our capital allocation strategy hasn’t changed much, we’ve been disciplined about acquisition pricing, not paying above about 3.5 times earnings for businesses we acquire. Now that we’ve refinanced our debt, we’re starting to consider competing uses of capital such as share buybacks and potentially dividends in the future. However, because we have significant tax losses and no franking credits yet, dividends are less attractive to Australian shareholders at this stage. We believe we are undervalued compared to global peers and are still focused on growing our footprint and adding value rather than returning capital. We generate good cash flow now and will assess the longer-term capital allocation strategy over the next six to twelve months. The board has not yet deeply discussed this, but we want to ensure we don’t under-invest given the strong growth opportunities and our leading market position.

15/04/2025 Are there more acquisitions planned and how will IMG fund them?

We are focused on building out our national footprint by acquiring quality, long-term businesses at attractive prices. There is a strong pipeline of such businesses that fit strategically and bring incremental work. For example, our recent acquisition of Kobe in Queensland has already won bigger, higher-quality contracts thanks to being part of our group. We fund acquisitions primarily through debt; we have refinanced our debt facilities and our bankers are comfortable lending for growth. We generate sufficient cash flow, so we don’t expect to need equity capital for typical acquisitions, which tend to be in the $6 t$12 million range. For larger strategic acquisitions in the $50 to $200 million range, we would consider raising equity, but nothing imminent is planned. We are patient and only pursue acquisitions that make strategic and financial sense without risking the business.

Competition

15/04/2025 How do Wilson, Chubb, and IMG differ, and who is winning or losing market share?

Wilson started as a car parking operator and expanded into physical security with guards and patrols. They have a large presence but operate mainly in labor-intensive security, which is different from our focus on electronic security that minimizes labor. We see Wilson more as a company to disrupt with our video guarding technology rather than a direct competitor. Chubb is our closest competitor in Australasia, with a stronger focus on fire monitoring and servicing alongside security. They are slightly larger than us but we are rapidly gaining ground. Both Chubb and we use similar monitoring platforms, though we are upgrading ours to global leading standards. Other players like Securitas have a smaller presence here compared to Europe. The market remains fragmented with many regional players. Security services in Australia are a $5 billion market, plus about a fifth more in New Zealand, but there is no clear national leader. Our strategy has been to build a national footprint through acquisitions, enabling us to offer national services with better efficiency and value. This footprint will support deploying the latest technology and expanding further.

Competitive Advantage

23/11/2023 Is the commercial business a higher or lower multiple than residential, based on ADT’s recent sale of their fire and commercial business at 11.2 times?

I find commercial business more interesting because it offers easier levers, better profitability, better cash flow, and quicker growth. There is less competition and a more mature market for services. The two segments are fairly similar, though residential has many customers paying smaller amounts across a fixed cost base, which provides recurring cash flow but requires chasing more bills if payments stop. Other countries separate these segments, but I don’t think it works well. We provide security services under one central brand, leveraging ADT’s quality commercial work to rebuild our brand so residential customers recognize ADT as smart and market-leading.

01/09/2024 How is the company positioned in terms of leadership, workforce, and technology?

We have national coverage with 96 highly qualified security technicians in Australia and 40 in New Zealand, providing a strong platform and comparative advantage. Our big commercial customers value our openness to technology and our leading operating platform, which integrates new technologies and solutions. We are focusing on improving supplier relationships to secure good terms and collaborative solutions that benefit customers. We continue to improve and simplify back-office operations while maintaining a strong front-end focus. Refinancing debt remains a priority, and we remain open to opportunities, including M&A, which has proven valuable and created shareholder value.

04/11/2024 What is the difference between traditional alarms and video verification in security monitoring?

Traditional alarms typically trigger a sensor, which often results in false alarms about 95% of the time, leading to costly guard dispatches that may not be effective. Video verification allows the event to be triggered and verified by a camera, which can act as the sensor itself. This enables live viewing and immediate verification, allowing police to respond quickly if the event is real. This technology is more effective and cost-efficient, preventing unnecessary guard dispatches and improving response to actual incidents.

04/11/2024 How has guard technology evolved, and what is Intelligent Monitoring Group’s approach with its new Guard service?

While many cameras exist in cities, most only record events for later review, which limits their usefulness. IMG’s Guard service uses live video monitoring with AI-graded control rooms to replace traditional guards. This approach is about half the price of having a person on-site and twice as effective at detecting and responding to criminal activity in real-time. The company is competing directly with traditional guarding services by leveraging technology to provide better security outcomes.

14/11/2024 What is the difference between the current commercial security monitoring service and the new guarding service?

Today, if you buy an alarm system, it alerts you if there’s a problem, but you don’t know what triggered it, like a submarine radar showing a blip without identifying it. You either check yourself or we send a guard. Police usually won’t respond because 95% of alarms are false. With the new guarding service, including video cameras and patrols, we can verify events automatically. Our A1-graded control rooms are bomb-proof and resilient, allowing us to monitor events 24/7 and call police more efficiently, which helps reduce crime and catch offenders. This service costs a bit more upfront but reduces false callouts and associated costs, making it cheaper and more effective overall.

15/04/2025 How does IMG compete with Chubb and what is the role of the new board member from Chubb?

At the core, this is a service business where success depends on delivering reliable service at a price customers are willing to pay. Technology is a key differentiator. When I joined, the industry was lagging because major players like Chubb and ADT were using very outdated operating platforms, think 1980s pre-wireless era systems. We have invested heavily to modernize our control rooms and adopt leading global technology, especially around video integration. Video is a game changer, not just for security but for broader applications, allowing centralized live monitoring and fundamentally changing the economics of security. The new board member with Chubb experience brings valuable insight, but our competitive edge lies in our advanced technology platform and ability to connect with IP devices and edge AI technologies. The industry is slow to change, but we believe we currently hold a technology advantage over peers.

15/04/2025 Who is winning or losing market share in the security services market and why?

I believe IMG is the market leader now. Since acquiring ADT, we have grown its revenue from about $2 million to over $5 million per month within 18 months. Three years ago, we were virtually unknown in the industry; now we are recognized as a key player, even delivering the keynote speech at the industry conference. While we respect our competitors, none have our national footprint or technological advantages. Securitas, with its global strength, and Sapio, recently privatized from Telstra ownership, are well-positioned to do well. Seacom remains strong. However, some older companies like Chubb and Honeywell, despite their brand recognition and safety reputation, may struggle with technology adoption. Overall, the environment is mixed, but we are currently setting the pace.

Growth

23/11/2023 Do insurance companies recognize the value of monitored alarms and offer discounts, especially from a residential perspective?
Yes, some insurance companies do offer discounts for monitored alarms, but it’s inconsistent. Sometimes they don’t tell you, and sometimes you have to ask. Some are explicit when you take insurance, asking if you have a monitored alarm, but you need to clarify what that means. There is definitely value, especially for businesses and commercial customers, but also for residential consumers. For example, having an A1 grade means we operate in bunkers, so if Opus goes down, we can switch to Telstra security service on your property. Insurers should give discounts for that. Given recent Opus outages, this point is more relevant now than it was three weeks ago.

15/04/2025 How is IMG’s subscription revenue growing amid economic slowdown concerns?

The Australian economy is still stable, with an election upcoming but no major economic impacts yet. New Zealand has experienced a recession on and off over the past year, creating a tougher environment there. Interestingly, tougher economic conditions can increase demand for security as concerns about protection and crime rise. Historically, we have not seen a correlation between economic cycles and subscriber numbers. The first year after acquiring ADT was focused on turnaround and completing a major 3G network upgrade. Now, we are shifting to growth, targeting high-value, high-margin customers with advanced camera products. This means total customer numbers may grow slower than revenue and profitability, but the business remains stable with low churn despite economic conditions.

Financials

23/11/2023 Will the working capital adjustment be returned to IMG upon completion of the ADT or New Zealand business, and what is the sum from the quarterly update?

We are finalizing the balance sheet and negotiated sensible working capital adjustments in the deal. The purchase was $45 million with $37 million in cash to buy the add-on transaction, which initially was a $200 million deal. Regarding creditor payments, we control the bank accounts and approve everything, but JCI’s teams handle the creditors, so there is significant work to unwind that. We expect the result to broadly align with what was indicated in the deal, and I see no reason for it to differ. The cash flow statement from the last quarter included all transaction costs, which are now behind us.

11/07/2024 What is the go-to-market plan for commercial customers, including sales cycle, contract value, recurring components, and margins?

The commercial market involves a lot of tender activity, but that’s not where we primarily play. When ADT exited commercial IT services, they left behind monitoring contracts, which we still manage. We have historic relationships and are rebuilding our network, reassuring customers that we are back and committed. The sales cycle involves ongoing conversations with known contacts, with some large customers willing to engage once they see we have our own people and network in place. Typical job sizes currently range from $300,000 to $500,000 as we rebuild, avoiding large upfront multi-million-dollar projects to maintain stable employment for skilled staff. However, we do have customers planning phased upgrades worth up to $30 million over several years. The sales cycle varies by customer, often influenced by financial year-end spending patterns, with government clients tending to spend before June 30. Security remains a priority for businesses, and evolving technology like cloud, cameras, and AI is driving new conversations. Maintenance costs for a full system can be about $200,000 annually on a $1 million system, reflecting the 24/7 nature of these operations. Long-term contracts are common, with some customers having relationships spanning 10 to 20 years.

01/09/2024 What is the impact of the recent tax loss recognition on the company’s financials and trading status?

We are finalizing a beneficial tax impact from our tax losses, which our accountants and auditors decided late yesterday should be recognized on our balance sheet. This was identified quite late in the process. To implement this, we will enter a brief trading halt today but expect to resume trading by Monday. The results are otherwise as presented, and I’m pleased to report that we delivered underlying normalized adjusted EBITDA, including ADT for 12 months, of $34.8 million, exceeding our upgraded guidance of $32 to $32.2 million. The actual reported adjusted EBITDA was $32.6 million. When we started the journey, we couldn’t include a full year of ADT due to timing, but it is a consistent business month to month. We initially target $31 million adjusted EBITDA for 12 months, upgraded to $33.5 to $34 million in May-June, and have now delivered $34.8 million, which is very pleasing and aligns with the type of business we aim to be.

01/09/2024 How is the company’s cash position and debt situation following recent acquisitions?

We have $11.7 million in cash at June 30 after paying for the AAG and ACG acquisitions, with reported cash a$25.6 million before that payment. Including AAG and ACG in a four-year forecast profit for 2024, earnings increased to $4.2 million from $3.86 million. We now see ourselves as a $40 million-plus EBIT business. We are rebuilding our models and budgets as these acquisitions are largely integrated. The $40 million EBIT figure is before growth or cost improvements. Strategically, the balance sheet and net debt are most important. Net debt stands at $68.3 million against a pro forma EBITDA of over $40 million, with an EBITDA-to-net-debt ratio of 1.7, which is very refinanceable. Delivering audited accounts and pushing against the guaranteed minimum interest period are current priorities. The goal is to replace the expensive financing from the ADT acquisition with a senior financing facility.

01/09/2024 What caused the higher-than-expected capital expenditure this year and what are the expectations going forward?

Capital expenditure was much larger than expected due to inherited pre-signed contracts requiring delivery, including 3G to 4G security system conversions. We have repriced our security systems so new systems generate returns through the P&L rather than capital expenditure. We are ceasing ad-owned equipment and effectively giving historic equipment to customers starting this financial year. Going forward, the main persistent capex items will be the ADT medical business, where equipment is purchased and rented to customers, and the New Zealand business’s 3G upgrade, estimated a $5 million next year. Other capex will be stay-in-business or growth-related, with general business capex expected to be in the low single-digit millions, including growth in medical. Last year’s core business capex was around $0.5 to $1 million, covering computers, servers, and vehicles. We refitted offices last year, which was above normal, so next year’s capex will be more normalized.

01/09/2024 What is the company’s view on long-term net debt to EBITDA ratio?

I am a conservative person. Currently, the trend is to deleverage, which excites the market. Five or ten years ago, people would have questioned a 1.7 times ratio because banks and acquirers would have accepted much higher leverage. The business is very stable and cash-generative. My best sense is that around 1.5 times net debt to EBITDA is appropriate now. Academics might say it should be three times, private equity five times, but we want to be seen as a mainstream small to mid-cap company. In Australia, a leverage ratio around 1.5 is sensible, with the possibility of gearing up to two times for the right opportunities, using cash carefully. Unknown factors like economic conditions could affect this, but the business’s stability, as shown by New Zealand’s 11% EBIT growth through recession, positions us well for capital management, including buybacks. We aim to maintain around 1.5 times net debt to EBITDA unless conditions change.

01/09/2024 What are the key financial highlights and margin targets from the recent accounts?

Adjusted EBIT on a 12-month basis was $34.8 million, with a margin of 26.7%, which is a very strong result and within our aspirational target range of 25 to 30%. This represents a healthy business. The accounts do not yet include ACG or AAG, as these are historic accounts. We incurred significant one-off costs this year, including two equity raisings, a debt refinance, due diligence, and transition costs related to moving the ADT business off Johnson Controls. These abnormal costs totaled $12.8 million and are expected to be gone in the new year, aside from some corporate initiatives and the ongoing debt refinance, which may also be non-recurring next year. The finance line reflects the refinancing efforts, and the tax benefit relates to a large tax shield from unrealized tax losses, which will allow us to avoid paying tax for some time.

01/09/2024 How does the accounting treatment of the ADT acquisition affect reported earnings and cash flow?

The accounting treatment requires us to depreciate the acquired customer base over five years, which results in a large non-cash charge affecting gross margin and EBIT lines. This charge is not material to actual cash flow or business economics but impacts reported profit. We have adjusted the reported numbers to reflect management’s view of depreciation and amortization, which relates mainly to capital expenditure needed to maintain the business, including property, plant, equipment, and leases such as our Sydney building lease. Subscriber assets and intangible amortization are non-cash and non-recurring and will disappear over the next couple of years. This explains why we generate strong cash flow but may not show strong bottom-line profit at a reported level for some time.

01/09/2024 What is the current status of net debt and refinancing efforts?

Net debt to pro forma EBITDA ratio is 1.7 based on reported numbers, and we are focused on completing the audit to fully concentrate on refinancing, which is underway with New Capital. We expect to provide an update at the AGM on October 8. Operating cash flow was $8.1 million this year, stepping up as we gained more control of the business after transitioning off Johnson Controls. Despite significant non-recurring costs, operating cash flow was $20.8 million, beating our forecast of $17.2 million from last August by over $3 million. Investing cash flows mainly reflect acquisitions and capital expenditure. The cash flows represent last year, which did not include a full 12 months of ADT or ACG/AAG and included non-recurring costs. We expect a significant step-up in cash flow in FY25.

01/09/2024 How does the company view cash flow quality and tax obligations?

Our underlying reported EBITDA converted to operating cash flow at over 100%, indicating a strong cash flow business. We have been on a tax payment plan related to early business stages, which concludes in December this year. We have a large tax shield from losses, so we won’t pay operating tax for some time.

01/09/2024 How has the company’s market capitalization and gearing evolved since acquiring ADT?

Prior to acquiring ADT last August, we were a $16 million market cap business; today, we are nearly $200 million. Our debt is higher but proportionally much lower relative to earnings and value. Our enterprise value, reflecting higher quality and safety, is still about 25% lower than before the acquisition. Our gearing is now within a standard range, and we are comfortable with the financial thesis as investors. We see significant opportunities to continue building shareholder value.

15/04/2025 What portion of IMG’s revenues are recurring, and is the remainder somewhat recurring?

We generate about $6.5 million per month in purely recurring monitoring revenue, roughly $80 million annually. On top of that, we have about $5 million per month in commercial enterprise work in Australia, plus over $1 million in New Zealand, much of which is also recurring. This commercial work includes access control, video, analytics, and integration services. Typically, customers spend about 20% of the system’s value annually on maintenance and upgrades, reflecting ongoing recurring revenue. We have a small portion, around 10 to 15% of revenue, from new site installations for a few large customers rapidly expanding their footprint. The rest of our revenue is largely recurring.

Operations

01/04/2024 How does the 3G to 4G transition work for your installed residential customer base, and will old 3G units continue to work while marketing new 4G products?

There is a specific contract type in our business where we bear some cost, but generally, it is not our responsibility that the 3G network is shutting down. It is up to the consumer if they want to continue the monitoring service with us. We charge cost price for upgrading 3G customers to 4G, not seeking profit. In Australia, we are nearly finished with this transition, targeting a shutdown date in June this year. Some customers are reconsidering due to the cost, especially since many were heavily subsidized under the old JDC by ADT. We haven't yet introduced the newer, more valuable systems in Australia, but we plan to offer alternative solutions to customers who have turned off 3G or declined to upgrade. The industry focuses a lot on this transition, and for us, it’s a matter of moving through it. In New Zealand, the transition is still pending. The medical business is different; we fund the capex there, especially in New Zealand where the returns are higher, more stable, and government-backed, making it an attractive business. Overall, we are comfortable with the 3G phase-out in Australia, and since IMG only acquired ADT last August, we came in late but have been working through it quickly.

01/04/2024 How long can you use the ADT brand, and what is the arrangement around it?

We have the right to use the ADT brand forever under license, similar to a McDonald's franchise. The legal structure was set for reasons unrelated to us, but essentially, the brand is ours forever unless we do something crazy like selling McDonald's or using it outside security or against Global Partners' interests, which won’t happen. We have a strategy I’m excited to announce soon, which will help mitigate risks around the brand. So effectively, it’s our brand indefinitely.

01/04/2024 Is there a plan to invest in improving customer service for ADT Home Security, given complaints about underinvestment or under-resourcing?

Absolutely. We have more staff today and have invested significantly in customer service, reallocating roles rather than cutting costs. We have new teams throughout the business, and customers who felt underserved in recent years will experience a different ADT. Previously, the business lacked the care a local owner or someone like me would provide, but now we get constant feedback and act on it. Some issues stem from old PL technology platforms, which have caused problems with recent panels. While disappointing, these issues are outside our control, but we are introducing an entirely new platform with better supplier relationships and development involvement. The net promoter score for ADT is very positive given our hundreds of thousands of customers, though we acknowledge occasional issues, especially during nationwide storm events. We deal honestly with these challenges and are investing in our teams with a new mentality toward customer management, being upfront and clear about improvements. We believe customers will increasingly be happy with ADT as a service provider going forward.

11/07/2024 Are you using AI video solutions to enhance remote monitoring of surveillance cameras?

Yes, we are actively using artificial intelligence in our video monitoring services, though we may not have fully pushed these solutions to market yet. We distribute AI-enhanced products through our wholesale channels, as we focus on being a trusted service provider rather than building platforms ourselves. Historically, large players in the security industry got stuck on their own product suites and failed to innovate, which we want to avoid. AI is essential for us because raw video data is very intensive, and AI helps us efficiently process and analyze it, often using offshore resources. This technology is a key part of our current operations and future plans, and we find it exciting.

01/09/2024 What is the company’s customer churn rate by segment and how is it managed?

Commercial churn is lower than residential. Commercial relationships, especially those integrated with technology, tend to last 10 to 15 years because customers don’t move. Residential churn is around 10% gross, reflecting people moving properties and whether they resign. About a third of people who move house immediately resign in a new house. The introduction of DIY technology allowing equipment portability is expected to improve churn. The main focus is improving service, which has been enhanced by integrating the ADT residential business into Signature, resulting in faster turnaround times, better responsiveness to customer issues like billing, and improved monitoring responsiveness. This service improvement is the best churn mitigant. The focus going forward is on growth and net customer additions.

01/09/2024 What are the company’s acquisition costs and customer acquisition metrics?

We do not have a clean metric for customer acquisition cost (CAC) in residential yet, as we have a substantial marketing budget but limited human resources. We understand returns on new customers but cannot yet provide metrics comparable to offshore players. The business is run for cash and cash profitability, focusing on product pricing and mix to achieve about a 30% gross margin on new sales and higher margins on recurring sales. We will develop more analytical insights on CAC in the next year but currently focus on profitability per customer and new customer at a cash profitability level.

01/09/2024 How does the company assess its performance and outlook after recent growth and acquisitions?

We are very happy to have outperformed guidance twice and ended the year with a strong business and clear operational clarity. We are now in a calm place focused on execution. Our corporate strategy is to keep driving cash flow and reduce net debt to about 1.5 times EBITDA next year. We are refinancing debt to position ourselves for capital and growth initiatives, putting the future in the business’s hands in a way it hasn’t had before. Our three growth areas are commercial and enterprise, residential security, and ADT care. Commercial has grown from $2 million annual revenue last August to over $40 million today, driven by organic growth and acquisitions. Residential security is growing through customer growth and new easy-install services, including DIY options that improve price points and product offerings. ADT care has seen significant investment in staff, contract resigning, NDIS accreditation, and government program engagement, setting the stage for growth in this expanding market.

01/09/2024 What progress has been made in video monitoring and IoT integration?

Our video monitoring business has seen a 650% increase in connected cameras this year, which is just scratching the surface. We believe we are now in a position to drive camera monitoring penetration, which positively impacts customer life and our business. Looking ahead to 2024, we expect a significant year with clear growth areas and a focused team.

04/11/2024 What is the entry-level security product offered by Intelligent Monitoring Group, and how easy is it to install?

IMG introduced a new residential product called ADT Home Secure, with the underlying product named CyberSense. It functions like an Apple iPad connected to sensors, cameras, doorbells, smoke alarms, and sirens. The system is designed for easy self-installation; for example, the CEO’s daughter installed his system in 20 minutes. The base kit costs around $1,100, which is competitive compared to $3,000 to $4,000 for similar systems. While many customers prefer professional installation, IMG offers fast service, delivering and installing within 24 to 36 hours.

04/11/2024 How does Intelligent Monitoring Group’s security technology support aging populations and care needs?

The basic security kits have evolved into care kits that monitor elderly or vulnerable individuals. For example, the CEO’s mother, who had a stroke, is monitored by this system, which connects to a base station and alerts a control room if she falls or needs help. The control room can dispatch assistance and access the home if necessary. This care functionality complements the company’s three pillars of growth: commercial security, residential security, and aging-in-place care, which is a growing market with significant opportunities.

15/04/2025 What does IMG do and how did it grow to its current position?

IMG is Australasia’s largest security monitoring and services business, covering Australia and New Zealand. We focus mainly on commercial customers, providing electronic security monitoring such as burglar alarms. We became publicly listed through a reverse listing of a small business I joined in early 2020. A key milestone was acquiring the ADT business in Australasia, which, along with our other brands like Signature Security and Intelligent Monitoring Service (IMS), forms the IMG group. When I took over, the company was a fragmented collection of small control rooms. We consolidated these with a new, leading operating platform, growing the business to about $200 million market value with around $80 million in debt. We now serve about 200,000 customers. The market in Australasia has lagged behind the rest of the world, lacking a leading security services business. Our goal is to unify the market, accelerate technology adoption, and increase security service penetration to levels seen in the US and Europe.

15/04/2025 Does IMG grow alongside its customers, and what are the unit economics of scaling with fast-growing clients?

Yes, we do grow alongside customers. For example, a fast-growing data center client is expected to contribute about 10% of our incremental growth this year, with millions of dollars in additional work and fully funded expansion plans. However, this new site work is highly competitive and tends to be lower margin. Competitors like Securitas, Convergent, and Chubb often bid aggressively for such projects. We have a pricing threshold below which we won’t go to protect margins, as underpricing can lead to losses. We position ourselves as a quality provider charging fair prices for reliable, robust service. For critical clients like Sydney Airport, system reliability is paramount, any downtime is a major issue. Technology has evolved rapidly in recent years, with smart cameras and advanced access control systems offering new capabilities. Most customers have yet to fully optimize these technologies, so we aim to push the envelope to deliver productive, safe outcomes that improve their businesses.

Outlook & Guidance

03/09/2024 What are the key highlights of the full year 24 results?

I think the key highlights are three-fold. First, we upgraded guidance from $31 million to $34 million and hit the top end of that, which is satisfying. Second, cash flow is coming through as we’ve worked off the transition from JCI and taken control of the business, making it a truly cashed unit. Third, we are now positioned to refinance the expensive ADT facility debt, aiming to reduce debt costs. Personally, I’m incredibly proud to lead a team of 530 talented, hardworking people making a real difference.

03/09/2024 How is the company positioned for full year 25 earnings and cash flow?

We are well-positioned for a year of strong earnings and cash flow. The past year was marked by ADT, equity raises, debt refinance, and acquisitions. Now, as one-off costs related to those things come out, the base business is strong. We upgraded pro forma earnings from $38 million to $40 million based on the strong year we just had. You’ll start to see growth and underlying trends more clearly this year. It will be a progression, not a point-to-point jump, but we’re optimistic that 2025 will prove we’ve built a robust, stable, clean, and simple business that can deliver.

04/11/2024 What is Intelligent Monitoring Group’s outlook on growth, acquisitions, and market consolidation?

IMG sees substantial growth opportunities across commercial, residential, and care markets. The company is focused on delivering consistent results and views itself as a compounding story with a clear path to becoming a billion-dollar business from its current $200 million valuation. The security industry is old and unconsolidated, with many local operators holding customer bases that need technology upgrades. IMG has the platform and expertise to acquire these businesses strategically, though it is not chasing acquisitions aggressively. The company expects acquisitions to be a feature of its growth strategy, buying businesses at attractive multiples.

04/11/2024 Can you summarize Intelligent Monitoring Group’s position and future prospects?

Intelligent Monitoring Group, trading as IMB on the ASX, is the leading security company in Australia and New Zealand, leveraging the globally recognized ADT brand. The company is innovating with technology-driven security and care solutions, expanding its market share, and pursuing strategic acquisitions. With strong growth momentum and a clear vision, IMG is positioned to continue its leadership and deliver significant value in the coming years.

15/04/2025 Does IMG plan to convert residential customers to video guarding, given the better unit economics and a suggested 10-year plan?

Yes, absolutely. The unit economics of video guarding are roughly four times better than standard monitored customers. For example, in residential settings, a typical install costs about $2,500 with $40 monthly monitoring fees, whereas video guarding installs cost about $4,000 with $120 monthly fees. The monitoring cost difference is $18 versus $25, reflecting much higher margins, but the service quality must be excellent to justify the price. We have begun upselling video guarding to small cohorts of our existing customer base with some success. However, many ADT customers were acquired under the previous JCI ownership at very low value, with subsidized pricing, so they may not yet fully appreciate or afford the guarding product. Most growth so far comes from large corporate, industrial, and higher-wealth customers who value and can pay for the enhanced service.

15/04/2025 When can investors expect IMG to report clear free cash flow figures without adjustments?

The ADT acquisition initially complicated our P&L and cash flow due to capitalization practices and transition costs, but these issues have largely been resolved. Our first half results were relatively clean aside from acquisition and refinancing costs, which are now behind us. Some smaller acquisitions caused short-term cash flow timing variations, but if we make no further acquisitions soon, these irregularities will cease. The recent refinancing generated some one-off write-offs and cash costs, which will still appear in the March quarter cash flow, but going forward, cash flow should be clean. We expect the fourth quarter cash flow for this fiscal year (March to June) to be the first truly clear and clean number for investors. The first half results also provide a solid base for moving forward.

Risks and Macro

04/11/2024 How has the security market in Australia and New Zealand changed recently, and how does it compare to the rest of the world?

The security market is evolving but not fully transformed yet. Wireless technology and cameras are key changes, but many consumers and businesses have not adopted these advances. Compared to overseas markets like the U.S., where 30% of homes have monitored security, Australia and New Zealand are behind. IMG aims to fast-track this adoption by bringing in the latest technology, sometimes even ahead of what is offered in the U.S. Security demand remains strong, and the value and results of monitoring services are improving significantly.

15/04/2025 How exposed is IMG to tariffs and supply chain issues?

Most of our security products come from Europe or Asia, so exchange rates can impact our cost of goods sold. Our video guarding technology, ADT Guard and Signature Guard, involves hardware from China and software from the US. While tariffs and geopolitical tensions could have some impact, we currently see business as usual with no significant disruption. Interestingly, some international players with non-core Australian operations might divest, creating rare, attractive M&A opportunities for us. This environment reinforces the value of being a local provider. IMG emphasizes its Australian and New Zealand roots, serving local customers with trusted, locally controlled services, which resonates strongly with clients amid global uncertainties.

15/04/2025 Will a recession impact IMG’s revenues and margins?

Recession is unlikely to critically impact recurring revenues and margins because security services are essential and ongoing. However, some growth from large upgrade and retrofit projects could be delayed as businesses may postpone investment decisions. For example, a major airline client is considering a multi-year security system upgrade, but timing is uncertain and could be pushed back in tougher times. Day-to-day recurring security services like access control and monitoring continue regardless of economic conditions, as businesses need these systems operational and maintained. Overall, IMG’s business model is robust, and I have not been concerned about market or economic volatility recently.

Personal Questions

15/04/2025 Can you share about your background and how your early years shaped who you are today?

I’m a New Zealander and also an Australian citizen. I grew up in a small country town in New Zealand within a multi-generation family business, which sparked my early interest in business. I left school early and earned a master’s degree with honors in economics from Auckland University. As a child, I was a competitive swimmer, representing New Zealand at near-Olympic levels, which instilled focus and drive in me. I like to think I bring that same focus to my work, but in a human way. Leading IMG, which now has nearly 600 employees, is rewarding because we’re transforming an industry that was neglected and building a team excited about the work and the value we provide. I have three children and enjoy coaching sports teams, applying the same philosophy I share with my team: first, get into championship shape, but the goal is to win five championships, building a sustainable, enduring team. I’m passionate about building a meaningful, commercially solid company that adds value and endures beyond my time.

15/04/2025 How was your transition from private equity and investing to becoming a CEO, and what motivated you?

I started investing early, just before the tech boom and bust, managing significant funds and gaining deep market experience. I then built a successful wealth management business in Melbourne for 13 years, focusing on direct investing and business turnarounds. By 2019, I realized I wanted a new challenge beyond investing, seeking a role where I could spend the next 20 years. IMG began as an investment opportunity, a failed roll-up I recognized from experience. I initially joined as a non-executive director and realized my skills matched the company’s needs, though I had to learn the technical side slowly. Being new to the industry was an advantage, allowing fresh perspectives and challenging old ways. The role is more about coaching and leading a team than being the star player, which is a shift from investing. It’s been an interesting and rewarding journey.

15/04/2025 How did your relationship with Peter Kennan develop, and what is his role at IMG?

I met Peter through a co-investment in a distressed hybrid bond trading at 10 cents on the dollar. We worked together to recover that investment to par, which was our first co-investment. We then partnered on another asset business, growing it significantly through M&A and restructuring. We’d known each other as co-investors for about a decade before IMG. In late 2019, I ran into Peter while trying to help Threat Protect raise working capital. We decided to join forces on the board for what we thought would be a small, short-term project. It turned out to be more work, but the underlying business was stable and cash-generative. We soon realized the opportunity was much bigger. Peter, who lives in Geneva, and I decided I would take a more active role. Today, Peter is chairman and I am CEO. We have regular board meetings and frequent communication, at least weekly. He is very engaged and informed on all major matters. Our backgrounds and objectives align well, helping us stay focused and avoid distractions common in listed companies. We keep external distractions minimal and prioritize direct communication with investors. I welcome feedback and advice but am empowered to run the business day to day.

15/04/2025 How does it feel to be a public company CEO?

To be blunt, I don’t like it much. It’s a very thankless role, somewhat like being a politician. Transparency is important, especially when trust is an issue, but it comes with real costs that people often overlook. One challenge is that all our competitors are watching everything we do, calls, LinkedIn profiles of staff, and so on. To protect our hard-earned advantage, I recently required all IMG staff to sign non-disclosure agreements restricting public comments about our technology and operations. While I appreciate the support of shareholders and don’t oppose being listed, the role brings challenges that must be carefully managed.

15/04/2025 What mistakes have you made as CEO and what have you learned?

I find mistakes more interesting than successes. One challenge has been embedding the cultural values I believe are essential: honesty, transparency, and inclusivity. I underestimated how difficult it is to get people, especially those from large global corporations used to risk-averse cultures, to fully embrace these values and make decisions confidently. We are working on this daily.

Another mistake was the acquisition of Mammoth in early 2022. It was done just as the Ukraine war began and before we acquired ADT. We hoped bundling products would accelerate growth, but the industry proved very slow to change, and the ADT acquisition made that strategy redundant. We shifted focus to being a service provider with agnostic technology. Although the deal didn’t look great on paper, we learned a lot about the industry and ourselves.

Lastly, the capital raise last year unfolded poorly. We planned a measured raise to secure funding ahead of refinancing, but a one-time liquidity need from our largest shareholder, Peter, led to market misinterpretation and loss of control over the process. It caused short-term share price impact and unhappy stakeholders. While I wouldn’t repeat it, we are now in a very strong position and focused on execution.

15/04/2025 What do you fear as CEO?

I take my responsibility to investors seriously and don’t underestimate the trust placed in me. My biggest fear is doing something that jeopardizes people’s financial well-being or trust. Life is unpredictable, and I can’t control everything, but I am resilient and committed to facing challenges head-on. Ultimately, I believe most people want to be proud of their work, provide for their families, and leave a positive legacy. I share those values.

Other

01/09/2024 How has the market responded to the company’s performance and valuation?

Share prices have responded well this year, reflecting the underlying value of the business at 6.5 times earnings. Despite this, we are actually 25% cheaper now on an earnings basis than before acquiring ADT, though still below comparable global peers. We are now a substantial business with over 500 employees across Australasia, serving over 200,000 customers. The business is 81% Australian and 19% New Zealand, with the New Zealand segment performing well despite recessionary conditions, demonstrating the business’s defensive strength.

03/09/2024 Can the market cap grow further given the recent share price increase?

Yes, I believe so. When we started, our EV/EBITDA was 8.6 times, and now it’s 6.5, so we’re actually cheaper today despite the share price nearly tripling. This is a very stable industrial business, not subject to pricing ups and downs. Globally, we remain cheap, and there is interest in the platform we’re building, though that’s out of my control. Our focus is on adding value. I don’t feel like we’re done yet; we have a real ambition to build a mid-cap company. If we execute well and do the hard work, this can be a substantial business over time. I have no doubt about the value of the business.

04/11/2024 How did Intelligent Monitoring Group grow its market cap from $50 million to over $200 million, and what are the growth prospects for the next 12 to 24 months?

Intelligent Monitoring Group (IMG) is now the largest security monitoring business in Australasia, with over 200,000 residential and commercial customers, including fire alarm monitoring. The significant growth was driven by acquiring ADT, the leading global security brand, and integrating it into IMG’s strategy to become the preeminent player in security. The company sees strong growth prospects as it leverages this brand and expands its market presence.

15/04/2025 What steps is IMG taking to improve transparency in financial reporting and communication with stakeholders?

I acknowledge there was valid criticism around last year’s capital raise and AGM guidance, where we paused longer than intended before full disclosure. That was regrettable and not something I want to repeat, though some factors were beyond my control. Our approach is to be open and accessible; we regularly engage with investors and understand the importance of clear guidance. Internally, transparency was challenging initially because, for the first 11 months after acquiring ADT, we lacked access to our own ERP system and had to run the business bottom-up, focusing heavily on cash management. Now, we are focused on clearly defining the key business drivers, such as customer numbers, customer value, and recurring revenue, and aim to provide much better, meaningful disclosure by the end of financial year 2026. We want to avoid overwhelming stakeholders with data that could confuse rather than clarify. Before releasing results, we seek feedback from investment banks and trusted advisors to ensure our messaging is clear. Ultimately, we are committed to building a long-term, valuable business and see transparent communication as part of that journey.

Sources

BourseTV Interviews Intelligent Monitoring Group (ASX: IMB) Managing Director Dennison Hambling Pt.1 

BourseTV Interviews Intelligent Monitoring Group (ASX: IMB) Managing Director Dennison Hambling Pt.2

Intelligent Monitoring Group (ASX: IMB) Investor Presentation

Intelligent Monitoring Group (ASX:IMB) | Webinar with Dennison Hambling | 08/07/24

Dennison Hambling: Intelligent Monitoring Group $IMB.AX, Transparency, Cash Flow | ValueHunt #48

Coffee Microcaps Morning Meeting with 3DP and IMB 14.11.24

Coffee Microcaps Morning Meeting with AHX, IMB and SPZ 30.08.24

Coffee Microcaps Morning Meeting (VRS & IMB) 28.03.24

Coffee Microcaps Morning Meeting (IMB & SPZ) 23.11.23

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