Computershare Limited · ASX:CPU
Computershare — H1 2003 Earnings Presentation
51 slides from Computershare's earnings presentation, Mar 6, 2003
Slide 1: Interim Results 2003 Presentation
Interim Results 2003 Presentation 6 March 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 Normalised EPS – 0.8 cents EBITDA in line with forecast at $54.9 m Generated operating cash flows of $33.1 m Capital Expenditure of $11.5 m, 60% down on prior year Share Buy-Back - 18.7 m shares acquired Interim ordinary share dividend 2.5 cents, fully franked Net De
Slide 4: Context of the Results
Context of the Results 1H normalised EBITDA in line with forecast Revenues impacted by slow down in corporate actions activity and low interest rates Continued operating cost savings, but not as rapid as revenue declines Technology spend declines Capital expenditure down 60% Changed comp
Slide 5: This presentation is structured around the following framework
This presentation is structured around the following framework Market Financial CEO’s Report Overview Results 5
Slide 6: CPU Revenues are driven by multiple factors
Market Overview CPU Revenues are driven by multiple factors Revenue type Revenue Driver Risk mitigation 2% Register Maint. & Growth in clients Retain existing 22% Recoveries and holders clients, win market share Corporate Actions Market conditions, Win new business; M&A activity link to key stakehol
Slide 7: Global Equities Market
Market Overview Global Equities Market M&A Value of Historical Equity Issuance Data M&A Number of Transactions (US$m) Transactions 2,500,000.0 18,000 16,000 2,000,000.0 14,000 12,000 1,500,000.0 10,000 8,000 1,000,000.0 6,000 500,000.0 4,000 2,000 0.0 0 1H92 2H92 1H93 2H93 1H94 2H94 1H95 2H95 1H96 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 1H’02 2H’02 1H’03 Registry maintenance 177.4 169.5 168.0 Corporate actions 34.8 22.8 21.8 Margin income (including sharesave admin) 41.9 30.6 28.1 Non Registry fees/sales 77.4 76.1 75.2 Recoveries 59.5 65.3 49.3 Interest income 2.5 1.7 1.8
Slide 11: Half Year Comparison
Financial Results Half Year Comparison A$m A$m Revenue Breakdown 414.7 177.4 396.5 169.5 168.0 384.5 339.6 348.7 77.4 76.1 75.2 79.7 74.6 41.9 71.9 73.0 34.8 54.9 30.6 28.1 22.8 21.8 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Non Registry Sales/Fees Revenue EBITDA 1H'02 2
Slide 12: Revenue Analysis
Financial Results Revenue Analysis Total Revenue A$m Revenue Breakdown 59.4 57.0 32% 51.6 35% 28.0 25.8 20.7 21.4 13.7 13.7 15.3 13.3 9.0 33% 6.8 6.0 0.7 Asia Pacific Europe North America Register Corp Actions Margin Recoveries Non Registry Main Income Sales/Fees Asia Pacific Europe North America 12
Slide 13: Cost Analysis
Financial Results Cost Analysis A$m Operating Costs A$m Operating Cost Breakdown 335.0 323.5 149.6 309.9 141.0 293.8 136.5 267.7 64.8 61.2 49.7 44.9 40.6 41.0 40.4 36.7 38.9 23.0 15.718.0 10.7 8.6 5.9 Recov Exp Personnel Occupancy Other Direct Technology Corporate 1H'01 2H'01 1H'02 2H'02 1H'03 1H'02
Slide 14: EBITDA generated from diversified portfolio
Financial Results EBITDA generated from diversified portfolio A$m Total EBITDA EBITDA Breakdown 1H'03 79.7 71.9 73.0 74.6 18% 54.9 45% 37% 1H'01 2H'01 1H'02 2H'02 1H'03 Asia Pacific Europe North America 14
Slide 15: Analysis of NPAT
Financial Results Analysis of NPAT A$m Tax losses written off Explanation Non-Recurring 40 Actual NPAT • Normalised NPAT for 1H’03 was $13.2m 30 16.2 2.5 20 33.4 24.5 10 20.4 4.7 18.3 4.6 3.9 0 1H'01 2H'01 1H'02 2H'02 1H'03 Note: Actual NPAT + Non-Recurring + Tax losses written off = Normalised NPAT
Slide 16: Effective Tax Rate
Financial Results Effective Tax Rate Headline effective tax rate 1H03 65.2% (1H02 38.6%) Normalised headline effective tax rate 1H03 30.3% (1H02 32.3%) Headline rate adversely affected by benefit of losses not brought to account $4.7 m (1H02 $2.5 m) Underlying effective tax rate 1H03 10.6% (
Slide 17: Headcount
Financial Results Headcount Total FTE's 5,321 5,165 4,966 5,000 4,300 4,000 3,000 2,591 2,053 2,000 1,000 0 June '98 June '99 June '00 June '01 June '02 Dec '02 17
Slide 18: Headcount Geographic Breakdown
Financial Results Headcount * Geographic Breakdown 1,183 1,200 1,038 Gross reduction of 296 FTE’s 1,000 894 Redundancy programs in 800 Australia, UK and Canada 655 600 548 Headcount increases in high growth businesses (i.e. Non 400 Registry) 200 154 77 74 0 d nd a S ia K g a an ic U on ad U al
Slide 19: Technology Costs – Establishing Global Platform
Financial Results Technology Costs – Establishing Global Platform 50 41.0 40.4 All A$m – internal cash costs only 38.9 40 All technology costs are expensed Major events: 30 SCRIP implementation: US, Canada and Hong Kong 20 Global Options system development (including BP) 10 0 1H'02 2H'02 1H'03 1
Slide 20: Analysis of Technology Costs
Financial Results Analysis of Technology Costs Category Cost Type Admin Occupancy 8% 3% External External bureau bureau 17% 17% Development 36% Computer Costs 9% Personnel & Comms on-costs 4% Maintenance 67% 21% Infrastructure 18% 20
Slide 21: Analysis of Technology Costs
Financial Results Analysis of Technology Costs A$m 60.0 54.7 52.0 50.0 48.4 15.8 11.0 8.0 40.0 External Bureau 6.2 8.2 8.6 Infrastructure Maintenance 30.0 Application Maintenance 15.3 10.3 11.9 Administration 20.0 1.0 3.7 1.8 Development 10.0 17.0 18.5 17.8 0.0 1H'02 2H'02 1H'03 21
Slide 22: Balance Sheet Strength
Financial Results Balance Sheet Strength Net Debt / Equity = 11.8% Net Debt = A$ 74m Committed Debt facility = A$ 250m Net Debt / Equity has increased as a result of the share buy-back and increased dividends 22
Slide 23: Cash Flow
Financial Results Cash Flow A$m 60.0 51.6 50.0 Gearing on a net debt to 41.2 equity basis – 11.8% 40.0 Committed resources 33.1 28.5 27.8 28.4 A$250m 30.0 27.1 23.4 19.9 Debtors days 20.0 outstanding have fallen 11.5 from 70 to 69 days 10.0 0.0 1H'01 2H'01 1H'02 2H'02 1H'03 Cashflow from Ops C
Slide 24: Capital Expenditure down 60% from Dec '01
Financial Results Capital Expenditure down 60% from Dec ‘01 CPU Group Capex A$ M Occupancy 2.0 Document Services Facilities 0.1 Information Technology 8.8 Other 0.6 TOTAL 11.5 24
Slide 25: Working Capital Management Improving but not enough
Financial Results Working Capital Management Improving but not enough 80 75 70 69 70 60 8% reduction in trade receivable balances 50 Receivable days 40 33 33 31 Payable days 30 20 10 0 days FY'01 FY'02 1H'03 25
Slide 26: 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% 4.00% 4.50% -20 -40 Exposure Hedged exposure 100% Hedged -60 26
Slide 27: Risk Management - Funds Balances at December 2002
Financial Results Risk Management - Funds Balances at 31 December 2002 By Category By Country Dividend US Australia Plans 15% 12% 1% 21% Dissenter 11% Canada 42% Corporate Broker Trust UK Actions 23% 45% 17% Regular Trust 13% CY02 average balance range A$3.1b – A$4.5b 27
Slide 28: Risk Management - Interest Rate Sensitivity
Financial Results Risk Management - Interest Rate Sensitivity No Exposure to exposure interest rates 34% 30% Interest Rate Hedging Strategy: - Minimise downside risk in current low interest rate environment Policy: - Minimum hedge of 25% / Maximum hedge of 75% Effective - Minimum term 1 year / Maxim
Slide 29: Equity Management – Fully Franked Interim Dividend of 2.5 cps
Financial Results Equity Management – Fully Franked Interim Dividend of 2.5 cps - EPS – Normalised 0.8 cents - Dividend 5 cents per year - Current yield * 2.9% - Franking Benefit – Total return 4.1% * Based on share price of A$ 1.70 29
Slide 30: Equity Management – Share Buy Back
Financial Results Equity Management – Share Buy Back Commenced 11th September 2002 Acquired 18,710,000 shares Average price A$2.05 Scheduled to complete 11th March 2002 30
Slide 31: Financial Summary
Financial Results Financial Summary Result in context of poor market conditions Further challenges ahead for full year Work on efficiency gains and new client wins will flow through 2H Capital management initiatives progressing Integration of financial systems and processes largely complet
Slide 32: Full year guidance
Financial Results Full year guidance “Looking ahead in these uncertain times we are able to forecast and control our operating costs but it is difficult to be certain of revenues. At present the company expects to achieve EBITDA results for the full year (excluding non-recurring items) that are in l
Slide 33: CEO's Report
CEO’s Report Chris Morris Chief Executive Officer 33
Slide 34: Market Overview, Financial Performance, CEO's Report
Market Financial CEO’s Report Overview Performance 34
Slide 35: Managing our business through the cycle – Financial Management
CEO’s Report Managing our business through the cycle Financial Management Program – Cost control – Capital Management (Capex) – Timely Reporting 35
Slide 36: Managing our business through the cycle – Technology
CEO’s Report Managing our business through the cycle Technology – the key to our future – Workflow – Data Storage Systems (DSS) – COSMOS Options – Global Portal – USA and Canada completed 36
Slide 37: Managing our business through the cycle – Markets Technology
CEO’s Report Managing our business through the cycle Markets Technology – Restructured division with separate P&L – EFA – Supplier of software to over 30 exchanges 37
Slide 38: Managing our business through the cycle – Service Quality
CEO’s Report Managing our business through the cycle Service Quality - Australia significant lift in service standards - North America top in recent surveys - Continued focus in all regions 38
Slide 39: Managing our business through the cycle – People
CEO’s Report Managing our business through the cycle People – Accountability – Hiring Quality People – Graduate Program 39
Slide 40: Managing our business through the cycle – Winning and Retaining Business
CEO’s Report Managing our business through the cycle Winning and Retaining Business – BHP Billiton (Aus, SA, UK) – Whitbread (UK) – Fosters – PNC (USA) – David Jones – Bank of China (HK) – Tabcorp – China Telecom (HK) – Promina Group (Royal & Sun Alliance) At what margins? 40
Slide 41: Managing our business through the cycle – New opportunities
CEO’s Report Managing our business through the cycle The current business environment is creating new opportunities Short-term issues are important but we will not mortgage our future with a single focus on short-term gains. 41
Slide 42: Appendix A Revenue Breakdown by Country
Appendix A Revenue Breakdown by Country 42
Slide 43: Competitive Environment
Competitive Environment Clients Competitors Australia 1,229 APRL New Zealand 280 Hong Kong 419 UK 682 Lloyds, Capita Ireland 162 South Africa 562 USA 384 BoNY, DST, Mellon Canada 2,414 CIBC Mellon 43
Slide 44: Australia - Half Year Comparison
Australia - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 98.4 97.5 36.2 36.4 91.5 35.2 35.2 85.7 86.8 25.5 25.8 18.3 17.0 16.4 12.3 7.9 6.0 4.5 2.5 1.0 1.1 0.5 0.9 1H'01 2H'01 1H'02 2H'02 1H'03 Register Corp Margin Recoveries Non Other Main Actions Income Registry 1H'02 2H'02 1H'03 4
Slide 45: New Zealand - Half Year Comparison
New Zealand - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 7.6 7.2 7.1 5.2 5.1 4.0 4.2 3.8 2.4 2.1 1.6 1.2 0.8 0.9 0.4 0.4 0.1 1H'01 2H'01 1H'02 2H'02 1H'03 Register Corp Actions Margin Recoveries Other Main Income 1H'02 2H'02 1H'03 45
Slide 46: Hong Kong - Half Year Comparison
Hong Kong - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 15.9 13.0 13.2 12.3 8.9 10.0 9.2 3.6 3.0 2.3 1.7 2H'01 1H'02 2H'02 1H'03 Register Corp Actions Margin Recoveries Other Main Income 1H'02 2H'02 1H'03 46
Slide 47: United Kingdom - Half Year Comparison
United Kingdom - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 110.9 115.2 42.3 104.0 97.4 39.8 40.6 95.5 22.8 21.4 17.6 16.0 17.0 14.6 13.3 12.6 11.0 9.9 5.2 6.0 2.0 3.2 1.6 1H'01 2H'01 1H'02 2H'02 1H'03 Register Corp Margin Recoveries Non Other Main Actions Income Registry 1H'02 2H'
Slide 48: Ireland - Half Year Comparison
Ireland - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 8.1 6.8 5.9 4.9 4.1 4.8 3.3 3.1 2.8 1.9 0.9 1.1 0.2 0.2 0.4 0.1 0.1 1H'01 2H'01 1H'02 2H'02 1H'03 Register Corp Actions Margin Recoveries Other Main Income 1H'02 2H'02 1H'03 48
Slide 49: South Africa - Half Year Comparison
South Africa - Half Year Comparison A$m A$m Total Revenue Revenue Breakdown 15.5 12.9 13.3 12.7 11.5 9.9 10.1 9.5 1.2 0.9 0.6 0.7 0.2 0.4 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries 1H'02 2H'02 1H'03 49
Slide 50: United States - Half Year Comparison
United States - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 79.1 74.7 72.4 30.6 51.9 55.5 26.4 24.3 23.0 22.5 20.4 15.7 10.9 7.0 4.6 4.6 4.2 3.0 2.2 2.0 1.1 0.1 1H'01 2H'01 1H'02 2H'02 1H'03 Register Corp Margin Recoveries Non Other Main Actions Income Registry 1H'02 2H'02 1H'03 50
Slide 51: Canada - Half Year Comparison
Canada - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 94.3 79.2 78.2 42.7 41.3 39.0 66.0 65.2 13.4 13.5 13.5 11.6 10.7 6.7 6.5 6.2 4.7 5.0 3.3 4.0 0.1 0.1 0.3 1H'01 2H'01 1H'02 2H'02 1H'03 Register Corp Margin Recoveries Non Other Main Actions Income Registry 1H'02 2H'02 1H'03 51