Computershare Limited · ASX:CPU
Computershare — FY2003 Earnings Presentation
58 slides from Computershare's earnings presentation, Aug 28, 2003
Slide 1: Financial Year 2003 Results Presentation
Financial Year 2003 Results Presentation 28 August 2003 1
Slide 2: Market Overview and Financial Results
Market Overview and Financial Results Tom Honan Chief Financial Officer 2
Slide 3: Summary of results
Summary of results Ø Normalised EPS – 6.1 cents Ø EBITDA in line with guidance at $133.9 m Ø Reduction of over $60 m in operating costs – 10% on an annualised basis Ø Generated operating cash flows of $76.2 m Ø Capital Expenditure of $17.9 m, 68% down on prior year Ø Share Buy-Back - 18.7 m shares a
Slide 4: Context of the Results
Context of the Results Ø Normalised EBITDA in line with guidance, higher end of expectations Ø Revenues impacted by slow down in corporate actions activity and low interest rates Ø Operating cost savings of $60 m, in excess of revenue declines Ø Continued spend on Technology development Ø Restructur
Slide 5: This presentation is structured around the following framework
This presentation is structured around the following framework Market Financial CEO’s Report Overview Results 5
Slide 6: CPU Revenues are driven by multiple factors
Market Overview CPU Revenues are driven by multiple factors Revenue type Revenue Driver Risk mitigation 2% Register Maint. & Growth in clients Retain existing 21% Recoveries and holders clients, win market share Corporate Actions Market conditions, Win new business; M&A activity link to key stakehol
Slide 7: Global Equities Market
Market Overview Global Equities Market M&A Value of Corporate Activity Data M&A Number of Transactions (US$m) Transactions 2,500,000.0 20,000 2,000,000.0 15,000 1,500,000.0 10,000 1,000,000.0 500,000.0 5,000 0.0 0 1H92 2H92 1H93 2H93 1H94 2H94 1H95 2H95 1H96 2H96 1H97 2H97 1H98 2H98 1H99 2H99 1H00 2
Slide 8: Global Interest Rate Market
Market Overview Global Interest Rate Market % % UK US 8 8 6 6 4 4 2 2 0 0 1996 1997 1998 1999 2000 2001 2002 2003 1996 1997 1998 1999 2000 2001 2002 2003 % Canada 8 6 4 2 0 1996 1997 1998 1999 2000 2001 2002 2003 8
Slide 9: Financial Results
Market Financial CEO’s Report Overview Results 9
Slide 10: Group Financial Performance A$m's
Financial Results Group Financial Performance A$m’s Revenue 2003 2002 %Difference Registry maintenance 334.0 358.3 (6.8%) Corporate actions 43.6 58.0 (24.7%) Margin income (including sharesave admin) 63.7 71.3 (10.7%) Non Registry fees/sales 145.6 147.2 (1.1%) Recoveries 107.5 121.1 (11.2%) Interest
Slide 11: Half Year Comparison
Financial Results Half Year Comparison A$m A$m Revenue Breakdown 180.4 177.9 396.5 384.5 168.1 165.9 348.7 359.9 78.3 74.3 68.9 71.3 73.0 74.6 79.5 35.7 41.8 31.9 31.8 54.4 29.5 22.3 21.8 21.8 1H'02 2H'02 1H'03 2H'03 Register Main Corp Actions Margin Income Non Registry Sales/Fees Revenue EBITDA 1H'
Slide 12: Revenue Analysis
Financial Results Revenue Analysis Total Revenue A$m Revenue Breakdown 120.7 111.3 102.0 30% 37% 56.3 52.7 37.9 38.6 36.7 33.5 28.7 31.0 16.4 33% 13.1 14.1 1.5 Asia Pacific Europe North America Register Main Corp Actions Margin Income Recoveries Non Registry Sales/Fees Asia Pacific Europe North Amer
Slide 13: Cost Analysis
Financial Results Cost Analysis A$m Operating Costs A$m Operating Cost Breakdown 323.5 149.6 309.9 293.8 141.0 278.9 136.5133.5 64.8 61.2 54.6 49.7 44.9 40.6 41.0 40.4 42.1 38.9 36.7 23.0 25.9 15.7 18.0 18.8 10.7 8.6 5.9 4.0 Recov Exp Personnel Occupancy Other Direct Technology Corporate 1H'02 2H'02
Slide 14: EBITDA generated from diversified portfolio
Financial Results EBITDA generated from diversified portfolio A$m Total EBITDA EBITDA Breakdown FY 2003 79.5 73.0 74.6 27% 54.4 40% 33% 1H'02 2H'02 1H'03 2H'03 Asia Pacific Europe North America 14
Slide 15: Restructuring costs of $35.1m will provide ongoing cost savings
Restructuring costs of $35.1 m will provide ongoing Financial Results cost savings of $22.7 m per annum Restructure Costs Annualised Savings Savings realised in FY 03 Redundancies 23.2 21.2 3.5 Property write offs 9.7 0.3 0.0 Other restructure costs 2.2 1.2 0.0 Total 35.1 22.7 3.5 15
Slide 16: Analysis of NPAT
Financial Results Analysis of NPAT A$m Tax losses written off Explanation Non-Recurring 70 Actual NPAT ØNormalised NPAT for FY’03 60 54.9 57.8 was $41.1 m 50 45.8 ØNormalised NPAT for FY’03 16.2 4.7 after tax losses written off was 40 $45.8 m 30 57.8 24.9 20 38.7 10 16.3 0 FY'01 FY'02 FY'03 Note: Ac
Slide 17: Effective Tax Rate
Financial Results Effective Tax Rate Ø Headline effective tax rate FY’03 41.8% (FY’02 31.0%) Ø Normalised headline effective tax rate FY’03 20.7% (FY’02 31.0%) Ø Headline rate adversely affected by benefit of losses not brought to account $6.2 m 17
Slide 18: Headcount
Financial Results Headcount Total FTE's 5,321 4,966 5,029 5,000 4,300 4,000 3,000 2,591 2,053 2,000 1,000 0 June '98 June '99 June '00 June '01 June '02 June '03 18
Slide 19: Headcount by Geography
Financial Results Headcount * Geographic Breakdown 1,200 1,143 Ø Gross reduction of 575 1,000 978 973 FTEs Ø Redundancy programs in 800 Australia, UK, Canada & 600 554 South Africa 468 400 Ø Headcount increases in high growth businesses 200 154 (i.e. Non Registry) 72 84 0 Australia Hong New UK Irela
Slide 20: Technology Costs – Establishing Global Platform
Financial Results Technology Costs – Establishing Global Platform 100 90 82.5 All A$m – internal cash costs only 79.9 80 All technology costs are expensed 70 60.9 Major events: 60 Ø SCRIP implementation: US, Canada, 50 South Africa and Hong Kong 40 Ø Global Options system development 30 (including B
Slide 21: Analysis of Technology Costs
Financial Results Analysis of Technology Costs Category Cost Type External Occupancy External Admin bureau 3% bureau 3% 10% 10% Computer Costs 9% Development 42% Comms 4% Maintenance 27% Personnel & on-costs Infrastructure 74% 18% 21
Slide 22: Analysis of Technology Costs
Financial Results Analysis of Technology Costs A$m 120.0 106.7 110.0 92.0 100.0 90.0 26.8 9.5 80.0 External Bureau 14.4 16.6 70.0 Infrastructure Maintenance 60.0 Application Maintenance 27.2 24.8 50.0 Administration 40.0 2.5 2.8 30.0 Development 20.0 35.5 38.6 10.0 0.0 FY'02 FY'03 22
Slide 23: Balance Sheet Strength
Financial Results Balance Sheet Strength Net Debt / Equity = 13.2% Net Debt = A$ 77.7m Committed Debt facility = A$ 250m Net Debt / Equity has increased as a result of the share buy-back, increased dividends and business acquisitions and investments. 23
Slide 24: Cash Flow
Financial Results Cash Flow A$m 79.4 76.2 80.0 68.3 70.0 Ø Gearing on a net debt to 60.0 56.9 equity basis – 13.2% 50.0 Ø Committed resources 43.3 40.0 A$250m 30.0 Ø Debtors days 17.9 outstanding have fallen 20.0 from 70 to 67 days 10.0 0.0 FY'01 FY'02 FY'03 Cashflow from Ops Cap Ex - PPE 24
Slide 25: Capital Expenditure down 68% from June '02
Financial Results Capital Expenditure down 68% from June ‘02 CPU Group Capex A$ M Occupancy 1.7 Document Services Facilities 1.0 Information Technology 12.8 Other 2.4 TOTAL 17.9 25
Slide 26: Working Capital Management Improving but not enough
Financial Results Working Capital Management Improving but not enough 80 75 70 70 67 60 52 53 13% reduction in trade receivable balances 50 43 Receivable days 40 Payable days 30 20 10 0 days FY'01 FY'02 FY'03 26
Slide 27: Margin Income – Interest Rate Sensitivity
Financial Results Margin Income – Interest Rate Sensitivity Margin Income Exposure A$m PBT 100 Impact 80 60 40 20 0 -2.50% -2.00% -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 3.50% 4.50% -20 -40 Exposure Hedged exposure 100% Hedged -60 27
Slide 28: Risk Management - Funds Balances at 30 June 2003
Financial Results Risk Management - Funds Balances at 30 June 2003 By Category By Country Dividend US Australia 11% Plans 8% 2% 23% Dissenter 8% Corporate Canada Actions 46% 17% UK 44% Broker Trust Regular 29% Trust 12% FY03 average balance range A$3.1b – A$5.4b 28
Slide 29: Risk Management - Interest Rate Sensitivity
Financial Results Risk Management - Interest Rate Sensitivity Exposure to interest rates 18% No exposure Interest Rate Hedging 38% Strategy: - Minimise downside risk in current low interest rate environment Policy: - Minimum hedge of 25% / Maximum hedge of 75% Effective hedging in - Minimum term 1 y
Slide 30: Equity Management – Fully Franked Final Dividend of 2.5 cps
Financial Results Equity Management – Fully Franked Final Dividend of 2.5 cps Ø EPS – Normalised 6.1 cents Ø Dividend 5.0 cents per year Ø Current yield * 2.6% Ø Franking Benefit – Total return 3.7% * Based on share price of A$ 1.90 30
Slide 31: Equity Management – Share Buy Back
Financial Results Equity Management – Share Buy Back Ø Commenced 11th September 2002 Ø Acquired 18,710,000 shares Ø Average price A$2.05 Ø Completed 11th March 2003 31
Slide 32: Financial Summary
Financial Results Financial Summary Ø EBITDA strong given market conditions Ø Significant cost reductions Ø Capex down 68% on last year Ø Working capital slowly improving Ø Share buy back, increased dividends Ø Substantial debt capacity Ø Major improvement in reporting time frames and quality 32
Slide 33: CEO's Report
CEO’s Report Chris Morris Chief Executive Officer 33
Slide 34: CEO's Report
Market Financial CEO’s Report Overview Performance 34
Slide 35: Focus during the year
Focus during the year CEO’s Report Ø Reducing costs Ø Use of technology to gain sustained efficiencies Ø Implementation of a client-centric model Ø Board structure Ø Our people 35
Slide 36: Reducing Costs
Reducing Costs CEO’s Report Ø Reduction in operating costs of 10% Ø Gross reduction in FTE numbers of 575 Ø Capital expenditure down by 68% Ø On-going cost base reduced substantially Ø Businesses now positioned to withstand further decline and/or benefit from increase in market activity/interest rat
Slide 37: Technology Application
Technology Application CEO’s Report Ø Migrated systems in US/Canada/South Africa/Hong Kong Ø Global options management and dealing platform Ø Total redesign of web site Ø New global platform live Ø Workflow allowing flexibility in operations 37
Slide 38: Management of the business
CEO’s Management of the business Report ØClient focussed teams ØShared services across all businesses ØP&L accountability 38
Slide 39: Group Function Objectives and Accountabilities
Management of the Business CEO’s Report Group Function Objectives and Accountabilities Regional Document Country Country Managing Registry Services Plans Analytics Manager Manager Director Manager Business Development and Marketing Business Dev & Marketing Profit and Loss Profit and Loss Profit and
Slide 40: Regional Highlights Asia/Pacific
Regional Highlights CEO’s Report Asia/Pacific Ø Won majority of IPO’s in Australia Ø 50% increase in holders under management (Fixed Interest) Ø 22% increase in value of employee plans under management 40
Slide 41: Regional Highlights North America
Regional Highlights CEO’s Report North America Ø Acquired Fifth Third Bancorp registry and plans businesses (retained all clients – no additional staff) Ø Acquired Charles Schwab Employee stock Purchase Plan business Ø Independent customer surveys place Computershare No 1 in service quality Ø Dealin
Slide 42: Regional Highlights EMEA Region
Regional Highlights CEO’s Report EMEA Region Ø Acquired 27% ComputersharePepper AG (option on a further 10%) Ø Acquired 30% National Registry Company of Russia Ø Plans Business – strong growth 42
Slide 43: The Board of Directors
The Board of Directors CEO’s Report Ø 5 Australia Ø 2 USA Ø 1 United Kingdom Ø 6 Non Executive 43
Slide 44: Our Executive Group
Our Executive Group CEO’s Report ØChris Morris CEO ØRob Chapman (New) EMEA ØSteven Rothbloom North America ØStuart Crosby Asia/Pacific ØPaul Tobin Legal Counsel ØPaul Conn Global Services ØTom Honan CFO ØPenny Maclagan Technology Services 44
Slide 45: Operational Management
Operational Management CEO’s Report Asia / Pacific EMEA NA Time Zone S. Crosby *R. Chapman S. Rothbloom Business Development *W.Angus TBA *M. Deleray & Marketing Finance *T.Ristevski D.Corney *S.Tulloch Operations *G.Giannini *K.Rayner *W.Newling * Appointed FY2002/03 45
Slide 46: Focus for the Year
CEO’s Report FOCUS FOR THE YEAR Ø To complete the restructure in Canada Ø To re-engineer the business in the UK Ø Leverage off our global reach Ø Improve and extend our cross selling opportunities Ø Continue to achieve cost reductions Ø Seek to acquire related businesses 46
Slide 47: Forecast
Forecast CEO’s Report Key drivers for increased profitability continue to be interest rates and corporate actions ØEBITDA in range $140 million to $160 million 47
Slide 48: Financial Year 2003 Results Presentation
Financial Year 2003 Results Presentation 28 August 2003 48
Slide 49: Appendix A Revenue Breakdown by Country
Appendix A Revenue Breakdown by Country 49
Slide 50: Competitive Environment
Competitive Environment Clients Competitors Australia 1,209 APRL New Zealand 266 Hong Kong 416 UK 682 Lloyds, Capita Ireland 175 South Africa 582 USA 1,245 BoNY, DST, Mellon Canada 2,289 CIBC Mellon 50
Slide 51: Australia - Half Year Comparison
Australia - Half Year Comparison A$m 36.5 36.4 Total Revenue 35.0 35.2 36.5 Revenue Breakdown A$m 98.3 97.3 86.8 86.6 25.8 25.7 26.8 18.3 17.0 16.4 15.6 11.9 7.9 5.7 5.6 4.5 2.5 1.0 1.3 1H'02 2H'02 1H'03 2H'03 1.0 1.1 0.5 0.8 Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'
Slide 52: New Zealand - Half Year Comparison
New Zealand - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 7.6 7.1 7.2 6.3 4.3 4.2 4.1 3.8 2.4 2.1 1.7 1.6 0.8 0.8 0.9 0.4 0.4 0.4 1H'02 2H'02 1H'03 2H'03 0.1 0.1 0.1 Register Main Corp Actions Margin Income Recoveries Other 1H'02 2H'02 1H'03 2H'03 52
Slide 53: Hong Kong - Half Year Comparison
Hong Kong - Half Year Comparison Total Revenue A$m Revenue Breakdown A$m 15.9 13.0 13.3 11.3 12.3 9.4 9.7 8.8 4.2 3.6 2.2 1.5 1.7 0.1 1H'02 2H'02 1H'03 2H'03 Register Main Corp Actions Other 1H'02 2H'02 1H'03 2H'03 53
Slide 54: United Kingdom - Half Year Comparison
United Kingdom - Half Year Comparison A$m Revenue Breakdown A$m Total Revenue 104.0 97.6 42.6 95.6 91.2 40.1 40.6 34.2 22.9 17.6 17.9 18.3 16.2 16.0 16.4 15.1 15.1 13.3 13.3 11.0 9.5 5.2 6.0 5.7 4.6 3.2 2.0 1.6 1H'02 2H'02 1H'03 2H'03 Register Main Corp Actions Margin Recoveries Non Registry Other I
Slide 55: Ireland - Half Year Comparison
Ireland - Half Year Comparison A$m A$m Total Revenue Revenue Breakdown 8.2 6.7 6.1 4.9 5.0 3.8 3.4 3.2 3.0 1.8 1.6 1.1 0.9 0.5 0.4 0.5 0.2 0.2 0.3 0.0 0.0 1H'02 2H'02 1H'03 2H'03 Register Main Corp Actions Margin Income Recoveries Non Registery 1H'02 2H'02 1H'03 2H'03 55
Slide 56: South Africa - Half Year Comparison
South Africa - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 18.0 16.1 15.5 13.3 11.5 11.5 9.9 9.5 0.7 0.8 0.9 0.8 0.4 0.6 0.2 0.0 0.0 1H'02 2H'02 1H'03 2H'03 Register Main Corp Actions Margin Income Recoveries 1H'02 2H'02 1H'03 2H'03 56
Slide 57: United States - Half Year Comparison
United States - Half Year Comparison A$m A$m Total Revenue Revenue Breakdown 74.7 72.4 60.3 31.9 55.5 26.3 24.2 22.8 23.6 22.2 20.4 19.5 16.2 11.7 9.7 7.0 4.5 4.6 4.2 1H'02 2H'02 1H'03 2H'03 2.8 3.2 2.2 2.0 2.6 1.1 0.1 0.1 Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'02
Slide 58: Canada - Half Year Comparison
Canada - Half Year Comparison A$m A$m Revenue Breakdown Total Revenue 79.0 77.8 78.3 49.8 65.2 42.5 41.7 39.0 12.8 13.7 13.4 12.1 10.8 10.2 6.7 5.2 6.6 6.2 6.1 5.8 4.9 5.1 3.3 4.1 1H'02 2H'02 1H'03 2H'03 0.1 0.0 0.2 0.0 Register Main Corp Actions Margin Recoveries Non Registry Other Income 1H'02 2H'