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hSenid Business Solutions PLC - Letter to the Shareholders

hSenid Business Solutions PLC - Letter to the Shareholders

To our shareholders:

Let me begin by stating an undeniable truth about hSenidBiz: we are resilient. In the face of local and global challenges, we remain steadfast in our certainty about our prospects and our numbers affirm this. We ended the year with an impressive 35 percent year-over-year growth in the USD value of new deals closed, supported by a 9 percent increase in our global client base, which reached 1,465. While our international expansions may have started slowly owing to local and international market conditions, we are now gaining momentum, going forward with no turning back.


We, at hSenidBiz share a common vision to propel our industry forward, striving to inspire and foresee growth for Sri Lanka, as a regional player in the Software-as-a-Service (SaaS) space. We strongly believe that Information Technology (IT) and its related industries are the future of Sri Lanka and the world. Just take a look around you, and it is abundantly clear that technological innovation has seeped into every aspect of life and business.


Key Developments

A significant amount of hard work and dedication was put in by our CEO, Sampath Jayasundara, and his team throughout this financial year of 2021/22. Although the global markets remained on a recovery mode, our team’s efforts resulted in a number of noteworthy wins during the year. While you will be able to find the details of all the activities in the CEO’s review, I will highlight some key points and discuss some of the salient aspects regarding the future of hSenidBiz.


Markets

We have been making solid headway in the Asia-Pacific region with our Enterprise and SaaS products and will continue to expand into new markets and territories in the coming months and years.


During the year, we re-entered the Indian market with PeoplesHR Turbo, a base product targeting selected market segments. While we have been making progress, we have not been completely satisfied with the pace of this progress. We are reevaluating some of our core assumptions and will implement course corrections as needed. We still believe that India is a viable market for PeoplesHR Turbo and will continue with our endeavors to grow the market.


Customers

hSenidBiz, your Company, is built on a firm customer-focused foundation. While our customers select us for our products, what keeps them is our customer-centric work ethic. A commonly articulated sentiment by our customers is, “we chose hSenidBiz because of the product, we stayed because of the team.”


Our work is to develop human resource systems and related services. Therefore, it is only natural that we are focused on offering stupendous services to our customers and their employees. We believe that when our customers are successful, we are successful.


Over and over again we have seen that, when customers implement a hSenidBiz HR system, the efficiency and productivity of their employees increase. This leads to increased employee satisfaction thereby improving organisational sustainability, which in turn boosts their bottom line and enhances shareholder value. Though we cannot claim direct credit for this, we are happy to be able to be one of the contributing factors in their success.


Talent

The success of our organisation is 40 percent product and 60 percent people. In other words, human capital is crucial to a company’s prosperity. Therefore at hSenidBiz, we have always attracted and continue to attract strong talent, which is fundamental to the future growth of our organisation. One of our key strategies is to build a global talent pool with in-depth local nuances. Our presence in over 40 countries and plans to increase our regional reach, have placed hSenidBiz in an ideal position to attract and have access to some of the best talent the world over.


Dividends and Retained Earnings

Capital allocation is at the cornerstone of any strategy. Yet very few corporates pay much attention to it. However, at hSenidBiz, we intend on making every effort to ensure your capital is allocated with utmost diligence.


At the outset, any cash generated from any business can allocate capital in various ways. If the business requires “maintenance” capex, then there will be no choice but to reinvest the entire cash flow back in the business to keep the proverbial wheel spinning. These businesses typically tend to be asset heavy with very low Return on Equity (ROE) Fortunately, given the asset light and intangible nature of the business hSenidBiz is in, it is not essential to reinvest a significant portion of the cash flows from profits, back in the business to maintain operations. Instead, this cash can be invested to grow the business through acquisitions, building new markets, developing product upgrades and most importantly, talent acquisition. We intend on doing exactly that, not only with the capital raised at the IPO, but also with the profits generated this year.


We will be declaring a dividend of LKR 0.30 per share this year, while the remaining cash will be reinvested back into the opera- tions, with the intention of compounding the intrinsic value of the business. Historically, our average Return on Invested Capital (ROIC) for the past three years have been north of 20 percent and hence, we firmly believe that at this juncture, our primary obligation to the shareholders is to reinvest in our business for steady long-term returns, and subsequently, a steady payout.


hSenidBiz is on a growth trajectory with high momentum, and it is vital that we look at the compounding effects of our investments. As a software product company, our investments in bringing cutting-edge software to our customers, coupled with our market development efforts, can unlock non-linear growth in shareholder value. We will be diligent in our capital allocations and will meticulously measure the return on capital when making capital commitments.


The digitisation of businesses and lifestyles has created enormous opportunities for companies in the technology space and we need to adopt a 10–20-year view of our business. This is a tough task in a market that typically focuses on a 6-to-12- month time frame. Yet, we must calibrate our mindset to focus on this long-term perspective.


The Road Ahead

As a mature HCM Software provider, we have the opportunity to acquire a larger portion of the markets we are currently operating in, which requires careful and thorough planning. We also need appropriate capital allocation, and this is something we have already committed to do.


With the aim of realising our long-term vision, we will experiment with new and modified business models, testing their viability and potential for far-reaching benefits. If these models look promising and have the ability to be scaled, we will invest in them.


When it comes to products and market development, we believe in taking bold decisions. We are fully aware that not all decisions will yield the expected results, but the lessons we learn from these activities will be invaluable in informing future actions. As I have mentioned earlier, ours is a long-term perspective. Therefore, we are not afraid of short-term sacrifices that will lead to long-term sustainable growth.


As we uphold top talent as central to our growth, we are working towards introducing an Employee Share Option Plan (ESOP). We are eager for all our employees to think of hSenidBiz as their own.


At hSenidBiz we do not concern ourselves with either short-term thinking or short-term results. We firmly believe that if we play the long-haul game, we will be rewarded. We will not play catch-up on earnings misses in the hope of keeping shareholders happy every quarter. We will, however, ensure that the business grows over the long-term. As Warren Buffet asserted, “In the short term, the market is a voting machine, but in the long term it’s a weighing machine”.


I truly believe we are building something great here at hSenidBiz which will have a profound impact on our customers, employees, and you, our shareholders. If you subscribe to our philosophy and way of thinking, I invite you to be part of our journey for the long-term.
 I wish you all the very best and look forward to seeing you at the Annual General Meeting (AGM). Rest assured my team, the board and I will be as engaging and candid as we can be to answer any questions you may have


Dinesh B. Saparamadu

Founder and Chairman hSenid Business Solutions PLC 

2nd August 2022