Computershare Limited · ASX:CPU
Computershare — H1 2017 Earnings Presentation
52 slides from Computershare's earnings presentation, Feb 15, 2017
Slide 1: Execution on track for sustained earnings growth
COMPUTERSHARE LIMITED Execution on track for sustained earnings growth 2017 Half Year Results Presentation Stuart Irving Chief Executive Officer and President Mark Davis Chief Financial Officer 15 February 2017
Slide 2: Robust underlying business performance continues
Robust underlying business performance continues Management EBITDA excluding the impact of margin income and exchange rate movements increased by 10.6% in 1H17 versus pcp 400 379.3 350 364.4 327.2 300 250 259.7 USD millions 200 180.7 150 163.3 163.3 100 50 0 FY13 FY14 FY15 FY16 1H17 Management EBITD
Slide 3: Executive summary
Executive summary 1H17: Solid results Total management revenue Management EBITDA Constant Currency1 Actual Constant Currency Actual $1,041.2m $1,003.2m $250.5m $241.3m 10.9% 6.9% 3.4% 0.4% Management EPS Statutory EPS Dividend per share Constant Currency Actual Actual Interim 27.12 cents 25.74 cents
Slide 4: Execution on track for sustained earnings growth
Execution on track for sustained earnings growth › Delivering on growth, profitability and capital management strategies - Encouraging growth in mortgage services, UKAR integration progressing well and US building towards scale - Register maintenance EBITDA improved on slightly lower revenues. Margi
Slide 5: Results summary
Results summary Management EPS up 4.4% in CC, revenue and EBITDA margin impacted by UKAR as anticipated Comparison in constant currency 1H17 @ CC 1 1H16 Actual CC Variance 1H17 Actual Total Management Revenue $1,041.2 $938.7 +10.9% $1,003.2 Operating Costs $791.1 $695.7 +13.7% $762.3 Management EBIT
Slide 6: 1H17 management NPAT analysis
1H17 management NPAT analysis Strong management EBITDA growth (ex MI), adverse external factors Controllable External 165 17.4 160 0.5 3.8 155 0.8 USD million 150 1.2 148.2 145 9.2 143.8 140 7.5 140.6 135 130 1H16 Mgt EBITDA Interest Dep'n & NCI MI Tax 1H17 NPAT FX 1H17 NPAT NPAT (ex MI) Amort @ CC
Slide 7: Management revenue breakdown
Management revenue breakdown Mortgage services driving higher total revenue Comparison in constant currency Business stream 1H17 @ CC 1H16 Actual CC Variance 1H17 Actual Business Services $403.1 $287.9 +40.0% $375.7 Register Maintenance $332.8 $342.0 -2.7% $329.7 Corporate Actions $64.6 $76.9 -16.0%
Slide 8: Management revenue bridge
Management revenue bridge Stable revenue performance with strategic growth in mortgage services - Growth in UK mortgage services +$98.9m - Growth in US mortgage services +$16.5m - Other Business Services 1,080 +$3.1m 1,060 8.0 2.4 13.5 6.3 9.2 1,040 9.5 15.3 1,041.2 1,020 38.0 1,000 118.5 1,003.2 US
Slide 9: Client balances and margin income
Client balances and margin income Ongoing growth in balances 18.0 16.0 105.8 16.6 Effective hedging - natural 7% 16.3 ($1.2bn) 15.1 15.2 15.0 14.0 Pre-hedged exposure 14.4 14.0 Effective hedging - derivative Average Client Balances for period USD billion 12.0 / fixed rate 29% ($4.8bn) 86.8 89.4 86.4
Slide 10: Client balances
Client balances Assuming an Strong leverage to rising rates increase of 100bps on our FY16 exposed 3.00% balances ($4.3bn) CPU would generate an additional $43m annualised EBITDA 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 J
Slide 11: EBITDA by business stream
EBITDA by business stream Comparison in constant currency 1H17 @ 1H16 CC Variance 1H17 1H17 Actual Business Stream CC Actual Actual EBITDA Margin % Business Services $81.4 $66.2 +23.0% $76.4 20.3% Register Maintenance & Corporate Actions $124.4 $125.2 -0.6% $123.4 31.3% Employee Share Plans $26.7 $2
Slide 12: Operating costs analysis
Operating costs analysis BAU operating costs down 0.2% Comparison in constant currency Operating costs 1H17 @ CC 1H16 Actual CC Variance 1H17 Actual Cost of sales $170.3 $164.0 +3.8% $169.7 Controllable costs Personnel $394.9 $342.9 +15.2% $377.7 Occupancy $45.3 $37.9 +19.5% $43.4 Other Direct $40.3
Slide 13: Operating costs bridge
Operating costs bridge Cost savings starting to emerge in 1H17 820 800 1.7 10.1 780 791.1 28.8 760 762.3 740 87.0 USD millions 720 700 695.7 680 660 640 Acquisitions 1H16 Operating Other 1H17 Operating UKAR FX 1H17 Operating costs @ CC costs costs 13
Slide 14: Operating and investing cash flows
Operating and investing cash flows Free cash flows fund growth and distributions 1H17 Actual 1H16 Actual Net operating receipts and payments $230.2 $216.8 Net interest and dividends* ($24.9) ($24.7) Income taxes paid ($32.0) ($33.6) Loan servicing advances (net) $11.7 ($183.8) Statutory operating ca
Slide 15: Balance sheet
Balance sheet Deleveraging provides capacity to drive growth and shareholder returns Dec 16 Jun 16 Variance Current Assets $1,300.8 $1,315.2 -1.1% › Total assets decreased primarily due to Non-Current Assets $2,668.8 $2,662.6 +0.2% revaluation of derivatives and asset disposals partially offset by M
Slide 16: Capital management
Capital management Cash flow and capital efficiency help drive growth and enhanced returns Cash Flow › Free cash flow and asset disposals fund strategic investments in mortgage services and Employee Share Plans and enhanced returns to shareholders. Net debt fell by $111.8m, -9.9% Recycling capital ›
Slide 17: Strategic Priorities: Growth: mortgage services – building scale
Strategic Priorities: Update Growth: mortgage services – building scale Comparison in constant currency 1H17 @ CC1 1H16 Actual CC Variance US mortgage services revenue $123.7 $106.4 +16.3% UK mortgage services revenue $140.0 $41.0 +241.5% Total mortgage services revenue $263.7 $147.4 +78.9% US US mo
Slide 18: Strategic Priorities: Register Maintenance – Margin Improvement
Strategic Priorities: Update Profitability: Register Maintenance – Margin Improvement Comparison in constant currency 1H17 @ CC1 1H16 Actual CC Variance Register Maintenance Revenue $332.8 $342.0 -2.7% Corporate Actions Revenue $64.6 $76.9 -16.0% Total Register Maintenance & $397.4 $418.9 -5.1% Corp
Slide 19: Strategic Priorities: Employee Share Plans
Strategic Priorities: Update Growth: Employee Share Plans – strong recovery and structural growth Comparison in constant currency 1H17 @ CC1 1H16 Actual CC Variance Transactional Revenues $40.5 $29.1 +39.2% Fee Revenues $56.1 $52.4 +7.1% Margin Income $9.1 $14.9 -38.9% Other Revenues $8.7 $8.4 +3.6%
Slide 20: Strategic Priorities: Structural cost out program underway
Strategic Priorities: Update Structural cost out program underway Total cost savings Expected benefit realisation (cumulative) Activity estimates $m FY17 FY18 FY19 FY20 Stage 1 25 - 30 28% 55% 69% 100% Louisville (unchanged) Stage 2 ~15 20% 90% 100% Spans of control Operational efficiencies 10 - 15
Slide 21: Conclusions
Conclusions › Execution on track for sustained earnings growth › Delivering on growth, profitability and capital management strategies. Anticipated benefits beginning to emerge › Robust underlying business performance continues › Progress in building growth engines and reducing costs › Recycling cap
Slide 22: Appendices
APPENDICES Statutory results Company Overview 1H17 Computershare at a glance Financial performance by half year at actual rates Global Registry Maintenance and Plan Managers Management revenue by region Management EPS – AUD equivalent Technology costs CAPEX versus depreciation Client balances Debt f
Slide 23: Statutory results
Statutory results 1H17 1H16 Vs 1H16 (pcp) Earnings per share (post NCI) 27.48 cents 15.22 cents +80.6% › Management results are used, along with other measures, to assess operating business Total Revenues $1,057.4m $941.5m +12.3% performance. The Company believes that exclusion of certain items perm
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 2016 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: 1H17 Computershare at a glance
1H17 Computershare at a glance Management revenue @ CC Management EBITDA @ CC Canada ANZ ANZ Canada 8% 13% 8% 16% Asia By geography Asia 10% 6% $1,041.2m $250.5m USA UCIA 44% UCIA 23% 26% USA 42% CEU CEU 1% 3% Communication Services Technology & other Communication Services Technology & other 8% 2%
Slide 27: Financial performance by half year at actual rates
Financial performance by half year at actual rates 1H17 2H16 1H16 2H15 1H15 2H14 1H14 2H13 1H13 Total Management Revenue $1,003.2 $1,035.5 $938.7 $1,016.5 $959.5 $1,045.7 $976.9 $1,037.5 $987.6 Operating Costs $762.3 $744.5 $695.7 $720.7 $699.0 $771.7 $709.2 $767.6 $747.6 Management EBITDA $241.3 $2
Slide 28: Global Registry Maintenance and Plan Managers revenue
Global Registry Maintenance and Plan Managers revenue Registry Maintenance @ CC Plan Managers @ CC Other Rev 8% Holder/Broker MI paid Issuer Paid 14% 29% 68% Fee 1H16 50% $342.0m $104.8m Margin Income TX 4% 28% Oth Rev 8% MI Holder/Broker 8% paid 1H17 @ CC 28% Issuer paid 69% Fee 49% $332.8m $114.4m
Slide 29: Management revenue & EBITDA at actual rates
Management revenue & EBITDA at actual rates Regional Analysis REVENUE BY REGION EBITDA BY REGION 1,200 350 1,035.5 1,003.2 290.3 300 1,000 85.6 938.7 82.4 31.7 80.0 242.3 241.3 250 800 38.5 38.7 510.0 456.2 USD million 200 USD million 455.3 148.5 600 150 103.3 106.2 34.2 400 51.6 29.6 100 0.1 13.9 2
Slide 30: 1H17 Management revenue at actual rates
1H17 Management revenue at actual rates Regional Analysis 200 178.7 170.1 180 160 139.4 140 120 100 USD million 80 55.0 54.4 60 36.5 36.4 36.0 33.2 31.5 31.1 27.7 40 18.5 17.4 14.7 11.7 11.4 10.9 10.3 10.0 20 9.4 7.7 7.3 6.5 5.9 5.7 4.6 4.1 2.8 2.7 2.7 2.5 2.0 1.6 1.1 0.8 0.6 0.3 0.0 0.0 0.0 0.0 0 R
Slide 31: Australia
Australia Management revenue: AUD million 1H16 2H16 1H17 184.9m 177.1m 174.6m 77.5 73.0 68.3 66.3 66.5 55.0 17.9 16.1 15.6 12.9 13.0 10.1 9.2 10.2 7.8 7.5 3.3 3.5 0.8 1.4 0.8 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions Services Relationship M
Slide 32: Hong Kong
Hong Kong Management revenue: HKD million 1H16 2H16 1H17 299.0m 298.0m 315.8m 199.9 194.0 190.3 63.7 66.3 54.4 42.6 37.6 33.5 11.8 12.0 6.9 Register Maintenance Corporate Actions Stakeholder Relationship Mgt Employee Share Plans 1H16 2H16 1H17 32
Slide 33: India
India Management revenue: INR million 1H16 2H16 1H17 1,384.7m 1,408.6m 1,634.5m 1,220.0 1,050.4 1,049.9 351.1 294.4 298.3 60.5 63.4 39.9 Register Maintenance Corporate Actions Business Services 1H16 2H16 1H17 33
Slide 34: United States
United States Management revenue: USD million 1H16 2H16 1H17 455.3m 510.0m 456.2m 123.7m Mortgage 200.8 106.4m Services Mortgage Services 177.2 179.9 178.7 170.1 157.5 42.7 35.3 36.5 34.9 31.5 25.8 29.2 28.7 14.7 18.0 20.1 17.4 9.7 7.3 5.3 Register Corporate Business Stakeholder Employee Share Commu
Slide 35: Canada
Canada Management revenue: CAD million 1H16 2H16 1H17 104.8m 114.0m 108.7m 44.4 43.8 41.9 39.6 36.6 34.4 14.5 15.0 13.4 11.6 9.2 8.6 3.7 3.7 3.6 1.1 1.3 1.1 Register Maintenance Corporate Business Employee Share Plans Communication Tech & Other Revenue Actions Services Services 35 1H16 2H16 1H17
Slide 36: United Kingdom and Channel Islands
United Kingdom and Channel Islands Management revenue: GBP million 1H16 2H16 1H17 91.1m Mortgage 101.2m 120.1m 162.8m Services 108.2 26.7m Mortgage Services 53.7 47.3 30.5 25.2 26.8 26.2 21.1 19.3 2.2 3.0 2.1 3.3 1.7 2.5 2.1 2.0 3.2 0.8 1.6 1.4 Register Corporate Business Stakeholder Employee Share
Slide 37: South Africa
South Africa Management revenue: RAND million 1H16 2H16 1H17 121.7m 123.6m 132.3m 111.4 108.2 109.1 11.8 7.6 7.5 8.7 5.5 6.7 0.4 0.3 0.4 Register Maintenance Corporate Actions Stakeholder Relationship Mgt Employee Share Plans 1H16 2H16 1H17 37
Slide 38: Germany
Germany Management revenue: EUR million 1H16 2H16 1H17 12.6m 23.9m 14.0m 13.3 9.9 9.5 8.6 2.8 2.6 1.1 0.8 0.6 0.4 0.5 0.4 0.1 0.0 Register Maintenance Corporate Actions Employee Share Plans Communication Services Tech & Other Revenue 1H16 2H16 1H17 38
Slide 39: Management EPS – AUD equivalent
Management EPS – AUD equivalent › For Australian investors, AUD equivalent EPS (actual) was weaker due to the combined impact of the weaker GBP and stronger AUD exchange rates. Management EPS (AUD) 1.0297 120 0.9139 100 0.8389 0.7542 0.7273 80 Cents per share 75.74 71.31 60 65.92 ~ 53.27 40 ~ 34.13
Slide 40: Technology costs at actual rates
Technology costs at actual rates 13.3% 14% 160 12.3% 11.7% 12% 140 133.9 5.3 121.3 115.1 10% Tech costs as a % of revenue 120 6.7 6.0 42.2 100 34.1 8% USD million 31.6 80 6% 46.8 60 39.2 41.9 4% 40 2% 20 38.3 38.6 39.6 0 0% 1H16 2H16 1H17 Development Infrastructure Maintenance Admin Technology costs
Slide 41: Capital expenditure versus depreciation at actual rates
Capital expenditure versus depreciation at actual rates 30 25 19.6 19.1 20 17.4 16.0 USD million 15 13.9 1.6 14.3 0.9 1.1 2.7 5.4 0.5 5.1 10 2.0 1.4 5 9.9 6.9 6.6 0 1H16 2H16 1H17 Information Technology Communication Services Facilities Occupancy Other Depreciation 41
Slide 42: 1H17 client balances at actual rates
1H17 client balances at actual rates Interest rate exposure Average funds held during 1H17 › CPU had an average of USD 16.6bn of client funds under management during 1H17. Exposure to › For 38% (USD 6.3bn) of the 1H17 average interest rates client funds under management, CPU had no 26% exposure to i
Slide 43: 1H17 client balances: exposed funds by currency
1H17 client balances at actual rates Exposed funds by currency (1H17 average balances) Average exposed funds Average exposed funds balance prior to hedging balance net of hedging Other 4% AUD Other AUD 4% 9% 9% CAD 13% CAD 15% USD USD 10.3bn USD 4.3bn 47% (USD 16.6bn x 62%) USD (USD 16.6bn x 26%) 40
Slide 44: Client balances: fixed and floating rate term deposits
Client balances Fixed and floating rate term deposits 8,000 Floating Rate Deposits Fixed Rate Deposits 7,000 6,000 5,000 USD million 4,000 3,000 2,000 1,000 0 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Fixed rate derivatives 2,500 Derivatives 2,000 1,500 USD million 1,000 500 0 Jan-17 Jan-18 Jan-19 Jan-20 J
Slide 45: 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 FY17 Mar-17 21.0 21.0 21.0 FY18 Dec-17 85.3 110.0 110.0 Feb-18 40.0 40.0 40.0 FY19 Jul-18 235.0 235.0 235.0 Dec-18 114.0 200.0 200.0 Feb-1
Slide 46: Key financial ratios
Key financial ratios Dec 16 Jun 16 Variance USD m USD m Dec 16 to Jun 16 Interest Bearing Liabilities $1,795.4 $1,863.3 (3.6%) Less Cash ($579.4) ($526.6) 10.0% Net Debt $1,216.0 $1,336.7 (9.0%) Management EBITDA $531.6 $532.6 (0.2%) Net Financial Indebtedness to EBITDA 2.29 times 2.51 times Down 0.
Slide 47: Effective tax rate
Effective tax rate Statutory and management Tax rate % 40% 34.0% 35% › The Group’s statutory effective tax rate has decreased from 30% 27.9% 24.9% in 1H16 to 16.2% in 25% 24.9% 24.1% 23.5% 1H17. This is primarily driven by the utilisation of carried forward 20% capital losses that were applied 16.2%
Slide 48: Dividend history and franking
Dividend history and franking New policy to maximise franking distribution 20.0 100% 18.0 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% 4.0 20% 2.0 10% 0.0 0% 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Dividend (AU cents) Franking (%) 48
Slide 49: US and UK mortgage services - UPB and number of loans
US and UK mortgage services - UPB and number of loans US mortgage services UPB up 8.5% since 30 June 2016 Performing Non-performing Comments At 31 Dec 16 At 30 Jun 16 At 31 Dec 16 At 30 Jun 16 During the period, a non- performing MSR was acquired where SLS was previously the Fully-Owned $8.8BN $4.9B
Slide 50: Mortgage services key terms
Mortgage services key terms Performance servicing: Servicing of a mortgage which is less than 30 days delinquent. Typically loans that meet the criteria of the Government Sponsored Entities. Non-performing servicing: Servicing of a mortgage that is over 30 days delinquent up to management of the for
Slide 51: Exchange rates
Exchange rates › Average exchange rates used to translate profit and loss to US dollars Currency 1H17 FY16 1H16 USD 1.00000 1.00000 1.00000 AUD 1.32591 1.37490 1.38432 HKD 7.75635 7.75858 7.75084 NZD 1.39457 1.50166 1.52080 INR 67.23397 66.28639 65.37094 CAD 1.31820 1.32181 1.31020 GBP 0.77617 0.671
Slide 52: Important notice
Important notice Forward-looking statements › This announcement may include 'forward-looking statements'. Such statements can generally be identified by the use of words such as 'may', 'will', 'expect', 'intend', 'plan', 'estimate', 'anticipate', 'believe', 'continue', 'objectives', 'outlook', 'guid