Computershare Limited · ASX:CPU
Computershare — H1 2018 Earnings Presentation
59 slides from Computershare's earnings presentation, Feb 14, 2018
Slide 1: Computershare Limited 2018 Half Year Results Presentation
COMPUTERSHARE LIMITED Strategic growth and cyclical recovery 2018 Half Year Results Presentation Stuart Irving Chief Executive Officer and President Mark Davis Chief Financial Officer 14 February 2018
Slide 2: Executive summary
Executive summary 1H18 results – strategic growth and cyclical recovery Management results1 Revenue EBITDA EPS $1,111.9m 10.8% $289.6m 20.0% 30.22 cents 17.4% Statutory EPS Free cash flow Dividend per share Actual Actual Interim 31.43 cents2 14.4% $166.3m3 10.9% AU 19 cents 11.8% 1H18 Management EBI
Slide 3: FY18 guidance – further upgraded
FY18 guidance – further upgraded Outlook improved › At last November’s AGM, we said that we expected FY18 Management EPS in constant currency to increase by around +10% on FY17 › Given the strong 1H18 result and the outlook for 2H18, we now expect Management EPS for FY18 in constant currency to incr
Slide 4: Good progress on executing strategic priorities
Good progress on executing strategic priorities Growth Profitability Capital Management › Mortgage Services › Corporate Actions › Strong free cash flow EBITDA up 72.1%, now revenue strengthening $166.3m, up 10.9% making a significant from FY17 cyclical lows, › Net debt to EBITDA contribution to Grou
Slide 5: Growth: Mortgage Services
Growth: Mortgage Services Performing well, now contributes 19.4% of Group EBITDA 1H18 @ CC 1H17 Actual CC Variance US Mortgage Services revenue $143.4 $123.7 +15.9% UK Mortgage Services revenue $119.0 $117.3 +1.4% Total Mortgage Services revenue $262.4 $241.0 +8.9% Total Mortgage Services EBITDA $56
Slide 6: Growth: Employee Share Plans
Growth: Employee Share Plans Investing for sustained growth with enhanced earnings potential 1H18 @ CC 1H17 Actual CC Variance Transactional revenue $38.7 $36.8 +5.2% Fee revenue $50.5 $53.0 -4.7% Margin income $6.9 $8.0 -13.8% Other revenue $8.7 $8.5 +2.4% Total Employee Share Plans revenue $104.7
Slide 7: Profitability: Register Maintenance and Corporate Actions
Profitability: Register Maintenance and Corporate Actions Recovery in event activity, focus on returning Registry to organic growth 1H18 @ CC 1H17 Actual CC Variance Register Maintenance revenue $326.5 $329.7 -1.0% Corporate Actions revenue $84.5 $64.5 +31.0% Total Register Maintenance & $410.9 $394
Slide 8: Profitability: Structural cost out programs progressing well
Profitability: Structural cost out programs progressing well Stage 1 and 2 benefits and timetable affirmed. Stage 3 details in April Benefit realisation (cumulative) Total cost savings Activity estimates $m FY17A FY18E FY19E FY20E Stage 1 25 - 30 28% 50% 70% 100% Louisville Stage 2 ~15 45% 95% 100%
Slide 9: Capital management: enhancing shareholder returns
Capital management: enhancing shareholder returns Cash generative business model › Strong free cash flow* $166.3m, up 10.9%. Recurring revenues, high margins and low maintenance capex, funds strategic investments and shareholder returns Strategic investments › Self funding growth engines with invest
Slide 10: 1H18 Management Results summary
1H18 Management Results summary Strong earnings growth and free cash flow 1H18 @ CC 1H17 Actual CC Variance 1H18 Actual Total Revenue $1,111.9 $1,003.2 +10.8% $1,127.8 Margin income $78.4 $66.6 +17.7% $79.6 Operating Costs $823.0 $762.3 +8.0% $835.1 EBITDA $289.6 $241.3 +20.0% $293.4 EBITDA Margin %
Slide 11: 1H18 management NPAT analysis
1H18 management NPAT analysis 21% management EBITDA growth (ex margin income) Controllable External 200 180 11.8 16.0 2.2 1.9 5.0 160 36.6 1.4 166.8 164.6 140 140.6 USD million 120 100 80 60 40 20 0 Dep'n & controlling 1H17 Actual Mgt EBITDA Tax FX Interest 1H18 NPAT @ 1H18 Actual Income Margin Amor
Slide 12: Management revenue breakdown
Management revenue breakdown Strategic growth, cyclical recovery and increased event activity Business stream 1H18 @ CC 1H17 Actual CC Variance 1H18 Actual Business Services $435.3 $375.7 +15.9% $441.4 Register Maintenance $326.5 $329.7 -1.0% $330.8 Corporate Actions $84.5 $64.5 +31.0% $85.2 Employe
Slide 13: Management revenue bridge
Management revenue bridge Multiple growth contributors Impacted by AUD, GBP and CAD 1,140 Large event - Growth in Class Actions for US Fund 1,120 +$33.9m 15.9 1,127.8 - Growth in US Mortgage 11.8 1,100 Services +$15.8m 0.4 0.0 2.1 1,111.9 - Other Business Services +$3.2m 36.0 1,080 USD million 1,060
Slide 14: Client balances and margin income
Client balances and margin income Stronger balances and increased yield drive accelerated margin income 18 17.3 140 16 16.6 16.8 16.3 15.1 15.2 15.0 14 14.4 120 14.0 12 Average Client Balances for period USD billion 100 105.8 10 89.4 86.8 86.4 80 8 79.0 79.6 74.3 6 69.6 66.6 60 4 40 2 0 20 1H14 2H14
Slide 15: EBITDA and margins by business stream
EBITDA and margins by business stream 20% EBITDA growth with margin expansion to 26% 1H18 @ CC 1H17 CC Variance 1H18 EBITDA 1H17 Actual Actual Margin in CC EBITDA Business Stream % Margin % Business Services $111.5 $76.4 +45.9% 25.6% 20.3% Register Maintenance & Corporate Actions $138.4 $123.4 +12.2
Slide 16: EBITDA and margin income by business stream
EBITDA and margin income by business stream Robust underlying performance continues - EBITDA ex MI +21% 1H18 1H18 1H18 1H17 1H17 1H17 CC EBITDA MI EBITDA EBITDA MI EBITDA Variance Business Stream @ CC @ CC ex MI @ ex MI CC Business Services $111.5 $35.5 $76.0 $76.4 $28.8 $47.6 +59.7% Register Mainte
Slide 17: Operating costs analysis
Operating costs analysis Cost to income ratio down to 74%, fixed labour costs held flat +0.3% Operating costs 1H18 @ CC 1H17 Actual CC Variance 1H18 Actual Cost of sales $195.0 $169.7 +14.9% $197.7 Personnel $477.4 $451.8 +5.7% $484.5 Fixed/Perm $441.8 $440.6 +0.3% $448.6 Variable/Temp $35.5 $11.2 +
Slide 18: Cash flow summary
Cash flow summary Free cash flows up 10.9% - self funding growth and capital management 1H18 Actual 1H17 Actual Net operating receipts and payments $273.1 $230.2 Net interest and dividends ($23.3) ($24.9) Income taxes paid ($50.5) ($32.0) Net operating cash flows excluding SLS advances $199.3 $173.3
Slide 19: Balance sheet
Balance sheet Leverage ratio down to 1.58x after funding strategic investments, share buy- back and dividend increase Dec 17 Jun 17 Variance Current Assets $1,261.7 $1,251.7 +0.8% Non-Current Assets $2,699.8 $2,695.3 +0.2% Total Assets $3,961.5 $3,947.0 +0.4% Current Liabilities $1,041.4 $753.1 +38.
Slide 20: Market issues
Market issues US tax reform, Brexit and Blockchain US Tax Reform - earnings impacts › For the full year FY18, the US Federal corporate tax rate for Computershare is expected to be around 28% compared to 35% in FY17. This will fall to 21% in FY19. In FY18, Computershare also expects to continue to be
Slide 21: Conclusions
Conclusions › Executing our strategic priorities, complemented by cyclical recovery and increased event activity, driving strong earnings growth: Mgmt EBITDA +20.0%, Mgmt EPS +17.4% › Purposefully designed Growth; Profitability and Capital Management strategies delivering results - Mortgage Services
Slide 22: Appendices
APPENDICES Statutory results Company Overview 1H18 Computershare at a glance Management EBITDA (ex MI) Financial performance by half year at actual FX rates Revenue and EBITDA by business stream at actual FX rates Global Registry Maintenance and Employee Share Plans Business Services revenue excludi
Slide 23: Statutory results
Statutory results 1H18 1H17 Vs 1H17 (pcp) Total Revenues $1,130.1m $1,057.4m +6.9% › Management results are used, along with Total Expenses $941.3m $875.3m +7.5% other measures, to assess operating business Statutory Net Profit (post NCI) $171.2m $150.2m +14.0% performance. The Company believes that
Slide 24: Management adjustment items
Management adjustment items Appendix 4D Note 2 Management adjustment items net of tax for the half-year ended 31 December 2017 were as follows: Amortisation › Customer contracts and other intangible assets that are recognised on business combinations or major asset acquisitions are amortised over th
Slide 25: Company overview
Company overview A leading global provider of administration services in our selected markets Who we are › Global market leader in transfer agency and share registration, employee equity plan administration, proxy solicitation and stakeholder communications › Also specialise in mortgage servicing, c
Slide 26: 1H18 Computershare at a glance
1H18 Computershare at a glance Management revenue @ CC Management EBITDA @ CC Canada ANZ ANZ Canada 9% 12% 6% Asia 15% By geography Asia 10% 7% UCIA $1,111.9m UCIA $289.6m 16% 20% CEU USA 49% 0% CEU USA 3% 53% Communicati Technology & Communicati Technology & on Services other on Services other Empl
Slide 27: Management EBITDA excluding margin income and FX increased by 21%
Management EBITDA excluding the impact of margin income and FX movements increased by 21% in 1H18 versus pcp 404.6 372.9 357.5 321.5 255.6 211.3 174.7 FY13 FY14 FY15 FY16 FY17 1H18 Note: Management EBITDA translated at FY17 average exchange rates and excludes margin income. 1H18 results translated t
Slide 28: Financial performance by half year at actual FX rates
Financial performance by half year at actual FX rates 1H18 2H17 1H17 2H16 1H16 2H15 1H15 2H14 1H14 2H13 1H13 Total Management $1,127.8 $1,110.8 $1,003.2 $1,035.5 $938.7 $1,016.5 $959.5 $1,045.7 $976.9 $1,037.5 $987.6 Revenue Operating Costs $835.2 $811.6 $762.3 $744.5 $695.7 $720.7 $699.0 $771.7 $70
Slide 29: Revenue and EBITDA by business stream at actual FX rates
Revenue and EBITDA by business stream at actual FX rates 1H18 1H18 1H18 1H17 1H17 1H17 Revenue EBITDA Actual Revenue EBITDA Actual EBITDA EBITDA Margin Margin % % Business Services $441.4 $113.5 +25.7% $375.7 $76.4 +20.3% Register Maintenance $330.8 $329.7 Corporate Actions $85.2 $64.5 Register Main
Slide 30: Global Registry Maintenance and Employee Share Plans revenue
Global Registry Maintenance and Employee Share Plans revenue Registry Maintenance @ CC Employee Share Plans @ CC Oth Rev 8% Holder/Bro MI ker paid 7% 28% Issuer paid 1H18 @ CC 68% Fee $326.5m $104.7m 48% Margin Income TX 4% 37% Oth Rev 8% MI Holder/Bro 7% ker paid 28% Issuer paid 69% 1H17 Fee 50% $3
Slide 31: Business Services revenue excluding Mortgage Services
Business Services revenue excluding Mortgage Services 1H18 @ CC 1H17 Other India Funds 3% Other India Funds 12% 5% 13% Voucher Services 6% Voucher Deposit Services Protection Class Actions 8% Scheme 33% $173.0m $134.7m 6% Deposit Class Actions Protection 46% Scheme 7% Corporate Trust 20% Corporate B
Slide 32: Management revenue and EBITDA at actual FX rates
Management revenue and EBITDA at actual FX rates Regional Analysis Revenue by region EBITDA by region 1,200 350 1,110.9 1,127.8 98.5 103.5 299.5 1,003.2 293.4 300 1,000 82.4 42.5 45.1 241.3 250 800 538.2 544.9 38.7 456.2 200 600 159.7 152.2 150 106.2 34.2 59.6 40.0 400 230.0 100 2.4 1.4 225.7 227.7
Slide 33: 1H18 Management revenue at actual FX rates
1H18 Management revenue at actual FX rates Regional Analysis 450 400 350 300 218.2 250 USD millions 168.9 200 142.8 150 100 53.5 53.2 52.8 52.3 50.6 39.6 34.2 31.8 29.6 26.4 22.4 18.4 50 12.7 12.6 12.0 11.9 10.6 10.6 8.5 8.2 7.8 6.4 4.8 4.1 4.1 3.3 3.3 2.8 2.7 1.7 1.6 1.5 1.2 0.5 0.3 0.0 0.0 0.0 0.0
Slide 34: Australia
Australia Management revenue: AUD million 1H17 2H17 1H18 174.6m 150.4m 165.0m 73.0 68.2 68.9 66.3 61.9 51.1 13.0 13.6 13.5 10.2 9.8 10.5 7.8 5.3 6.2 3.5 3.6 0.8 1.9 0.5 0.4 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions Services Relationship Mgt
Slide 35: Hong Kong
Hong Kong Management revenue: HKD million 1H17 2H17 1H18 315.8m 315.9m 344.7m 199.9 196.1 191.7 80.3 78.6 66.3 57.4 37.6 35.8 12.0 12.5 8.2 Register Maintenance Corporate Actions Stakeholder Relationship Mgt Employee Share Plans 1H17 2H17 1H18 35
Slide 36: India
India Management revenue: INR million 1H17 2H17 1H18 1,634.5m 1,816.9m 1,937.0m 1,453.8 1,421.5 1,220.0 439.0 351.1 308.0 63.4 55.0 76.6 Register Maintenance Corporate Actions Business Services 1H17 2H17 1H18 36
Slide 37: United States
United States Management revenue: USD million 1H17 2H17 1H18 456.2m 538.2m 544.9m 143.4m Mortgage Services 123.7m Mortgage Services 218.2 195.7 197.3 178.7 170.1 168.9 52.8 49.6 50.6 36.5 35.0 35.8 31.5 29.6 14.7 17.4 19.6 18.4 7.3 5.2 6.4 Register Corporate Business Stakeholder Employee Share Commu
Slide 38: Canada
Canada Management revenue: CAD million 1H17 2H17 1H18 108.7m 131.6m 131.6m 67.7 59.2 44.1 43.8 36.6 33.5 15.0 13.3 13.4 8.7 9.9 8.6 4.9 5.2 3.6 1.1 1.5 1.9 Register Maintenance Corporate Business Employee Share Plans Communication Services Tech & Other Revenue Actions Services 1H17 2H17 1H18 38
Slide 39: United Kingdom and Channel Islands
United Kingdom and Channel Islands Management revenue: GBP million 1H17 2H17 1H18 162.8m 168.5m 160.8m 92.4m Mortgage 91.1m Services Mortgage Services 113.3 108.2 108.3 26.2 28.0 24.4 19.3 20.1 20.5 2.1 1.7 1.5 1.7 2.5 2.0 2.1 2.7 2.0 3.2 2.0 0.0 Register Corporate Business Stakeholder Employee Shar
Slide 40: South Africa
South Africa Management revenue: RAND million 1H17 2H17 1H18 132.3m 124.5m 134.3m 115.3 111.4 105.9 11.8 10.0 8.9 8.7 8.2 9.0 0.4 0.3 1.2 Register Maintenance Corporate Actions Stakeholder Relationship Mgt Employee Share Plans 1H17 2H17 1H18 40
Slide 41: Germany
Germany Management revenue: EUR million 1H17 2H17 1H18 14.0m 25.7m 15.4m 13.3 10.8 10.1 9.9 2.6 2.1 2.0 2.2 1.1 0.4 0.3 0.1 Register Maintenance Employee Share Plans Communication Services Tech & Other Revenue 1H17 2H17 1H18 41
Slide 42: Management EPS – AUD equivalent
Management EPS – AUD equivalent › AUD equivalent EPS (actual) was impacted by the stronger AUD Management EPS (AUD) 120 1.0297 0.9139 100 0.8389 0.7774 0.7521 0.7273 Cents per share 80 75.74 71.31 72.35 60 65.92 53.27 ~ 40 ~ 39.39 20 0 FY13 FY14 FY15 FY16 FY17 1H18 AUD/USD average exchange rate 42 N
Slide 43: Technology costs at actual FX rates
Technology costs at actual FX rates 13.3% 160 11.5% 11.6% 12% 140 133.9 130.8 127.4 5.3 4.8 10% 4.3 Tech costs as a % of revenue 120 42.2 38.2 USD million 100 42.0 8% 80 6% 60 46.8 50.6 45.0 4% 40 2% 20 39.6 36.2 37.3 0 0% 1H17 2H17 1H18 Development Infrastructure Maintenance Admin Technology costs
Slide 44: Capital expenditure versus depreciation at actual FX rates
Capital expenditure versus depreciation at actual FX rates 30 25 21.1 0.7 20 5.9 14.6 Depreciation 14.3 USD million USD million 15 0.3 0.5 Capex 1.1 3.6 5.1 0.5 10 1.4 14.1 5 10.0 6.6 0 1H17 2H17 1H18 Information Technology Communication Services Facilities Occupancy Other Depreciation 44
Slide 45: Breakdown of client balances
Breakdown of client balances Significant leverage to rising interest rate cycle – $11bn of average exposed balances in 1H18 $17.3bn Total balances $11.0bn $6.3bn Exposed balances Non-exposed balances $2.8bn $8.2bn Hedged balances Non-hedged balances $6.9bn $1.3bn $1.6bn $1.2bn Non-hedged Natural hed
Slide 46: Client balances
Client balances Assuming an Strong leverage to rising rates increase of 100bps on our 1H18 3.00% exposed non-hedged balances ($8.2bn) CPU would generate an additional $82m 2.50% annualised EBITDA* 2.00% 1.50% 1.00% 0.50% 0.00% Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec
Slide 47: Exposed and non-exposed balances by business
Exposed and non-exposed balances by business Business Activity 1H18 Balances (billions) Margin income (millions) Exposed Non-exposed Register Maintenance 2.3 0.4 12.8 Corporate Actions 2.7 1.0 23.3 7.1 Employee Share Plans 1.6 0.2 36.3 Business Services 4.4 4.7 Totals 11.0bn 6.3bn 79.6m 17.3bn Margi
Slide 48: Breakdown of exposed balances by currency
Breakdown of exposed balances by currency Currently most exposed to USD rates though GBP and CAD remain important Average exposed balances hedged CAD Average exposed balances prior to hedging 3% Other USD AUD 33% 6% 3% CAD USD 2.8bn 13% (USD 11.0bn x 25%) GBP 64% USD 11.0bn (USD 17.3bn x 64%) USD 47
Slide 49: Profile of our swap and deposit book
Profile of our swap and deposit book Short duration fixed rate hedging – enhances yield without preventing the benefit of potential rate rises 2,500 Fixed rate deposits Swaps 2,000 USD million 1,500 1,000 500 0 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Floating rate deposits comprise both exposed and non-e
Slide 50: Debt facility maturity profile
Debt facility maturity profile Maturity Dates Debt Committed Bank Private SLS USD million Drawn Debt Debt Placement Advance Facilities Facility Facility Facility FY18 Feb-18 40.0 40.0 40.0 FY19 Jul-18 235.0 235.0 235.0 Dec-18 47.7 95.0 95.0 Dec-18 104.9 200.0 200.0 Feb-19 70.0 70.0 70.0 FY20 Jul-19
Slide 51: Key financial ratios
Key financial ratios Dec 17 Jun 17 Variance USD m USD m Dec 17 to Jun 17 Interest Bearing Liabilities including SLS advance debt $1,634.7 $1,573.1 +3.9% Less Cash* ($545.2) ($510.7) +6.8% Net Debt (including SLS advance debt) $1,089.5 $1,062.4 +2.6% Management EBITDA $592.9 $540.8 +9.6% Net Financia
Slide 52: Effective tax rate
Effective tax rate Statutory and management (at actual FX rates) Tax rate % 35% 30% 29.2% 25.7% 26.3% › The Group’s statutory effective tax rate has 25% 23.5% decreased from 16.2% in 1H17 to 7.4% in 1H18. This is primarily driven by the restatement of deferred tax balances due 20% to US tax reform g
Slide 53: Dividend history and franking
Dividend history and franking Franking suspended due to share buy-back 100% 20.0 100% 18.0 19 19 90% 16.0 17 17 80% 16 16 14.0 15 15 70% 14 12.0 60% 10.0 50% AU cents 8.0 40% 6.0 30% 30% 4.0 25% 20% 20% 20% 20% 20% 2.0 10% 0% 0% 0.0 0% 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 Dividend (AU cents)
Slide 54: Mortgage Servicing
US and UK mortgage services - UPB and number of loans US mortgage services UPB up 19.1% ($71.1bn v $59.7bn) Performing Non-performing At 31 Dec 17 At 30 Jun 17 At 31 Dec 17 At 30 Jun 17 Fully-Owned $15.1bn $8.5bn $10.9bn $12.4bn MSRs 1 67K Loans 38K Loans 89K Loans 103K Loans Excess strip deals Exce
Slide 55: Mortgage Services Revenue and EBITDA at actual FX rates
Mortgage Services Revenue and EBITDA at actual FX rates EBITDA margin continuing to improve 1H18 2H17 1H17 2H16 1H16 US Mortgage Services revenue $143.4 $133.5 $123.7 $52.2 $41.1 UK Mortgage Services revenue $121.7 $122.4 $117.3 $115.6 $106.4 Total Mortgage Services revenue $265.1 $255.9 $241.0 $167
Slide 56: Financial Snapshot – US Mortgage Servicing
Financial Snapshot – US Mortgage Servicing 1H18 revenue composition Other service Base fees servicing 24% fees 55% • Base servicing fees, $79.3m, +25.8% • Servicing related fees $29.5m, $143.4m +8.4% • Other services fees $34.5m, +3.4% Servicing related fees 21% Dec-17 Jun-17 FY17 Annual Report refe
Slide 57: Mortgage services key terms
Mortgage services key terms Performing servicing: Servicing of a mortgage which is less than 30 days delinquent. Typically loans that meet the criteria of the Government Sponsored Entities e.g. “Fannie Mae”, “Freddie Mac”. Non-performing servicing: Servicing of a mortgage that is over 30 days delinq
Slide 58: Exchange rates
Exchange rates › Average FX rates used to translate profit and loss to US dollars for key reporting currencies › The USD has weakened in 1H18 against pcp against major operating currency – GBP, CAD and AUD Currency 1H18 FY17 1H17 Var 1H USD has: USD 1.0000 1.0000 1.0000 AUD 1.28627 1.32964 1.32591 -
Slide 59: Important notice
Important notice Summary information • This announcement contains summary information about Computershare and its activities current as at the date of this announcement. • This announcement is for information purposes only and is not a prospectus or product disclosure statement, financial product or