Anna Ellis: Perhaps more on the domestic market, some of the sectors where we've been quite active in, have you seen any particular trends around investments, transactions in some of those spaces? Like perhaps we start with healthcare for example.
Michael Lukin: Healthcare is a great example Anna because I think if I recall, my 20-years in private equity, 20-years plus now unfortunately that old, healthcare has almost been the no brainer. If you find a good healthcare asset, regardless of where it plays in healthcare, it's generally been a good private equity asset. And so that's really been the playbook for a lot of private equity managers for the last 20 - 25 years. Everything from private hospitals to clinical roll ups to professional services in the space. They've all generally worked out pretty well. I think what we're seeing now in healthcare driven by the cost of doing business going up, whether it's rent costs going up, labour costs going up, consumables going up, you've got to really differentiate or determine which part of healthcare you want to play in. So, if you are a large business with a lot of tenancy that you see your rental costs going up and your labour costs going up, it's going to be really challenged where government funding is kind of flat to slowly growing. So, you get this impact of the jaws of death where your margin compression really hurts your earnings.
But I think what you need to do is just pick through the various areas of healthcare and find those areas where you're less susceptible to that. Either it's because you can grow your revenue stream either by ancillary services or price improvement or technology, new technology coming into the market. Or alternatively, you have a good control around your cost base. So, again, technology can play a role there around how you manage your cost base in your business.
Anna Ellis: So, what I'm hearing is just being in the right sector now isn't enough?
Michael Lukin: No, I think that's right, right.
Anna Ellis: You can’t just ride the growth of the market, its more competitive, you've got costs increasing faster than say what you can increase your revenue because of the funding...
Michael Lukin: Exactly right. And I think, we're seeing that more and more in different sectors, government services, business services. I think we're seeing a similar thematic where, generally providing services to the government. I think, if we think back five years ago, NDIS, it was almost like if you could find any asset in NDIS, it was clearly growing really quickly and as long as you got off the train before it stopped, you would do quite well. I think we're seeing a change in that market. Probably the one area where people are still relatively, riding the sector is technology. And I think that we will see a bit of differentiation there amongst technology assets, what are actually globally, best practice, what are domestic champions, what has got really strong growth with versus what just happens to be a business technology space. We'll start to see that separating out.
