Slide 1: Acquisition of Avelo and $206m Entitlement Offer
For personal use only Acquisition of Avelo and $206m Entitlement Offer Peter Dunai, Chairman Andrew Walsh, Chief Executive Officer Stuart Bland, Chief Financial Officer 6 August 2013
Slide 2: Disclaimer
DISCLAIMER Disclaimer This investor presentation (Presentation) has been prepared by IRESS Limited (ACN 060 313 359) (IRESS). This Presentation has been prepared in relation to an accelerated pro rata renounceable entitlement offer of new IRESS ordinary shares (New Shares) to be made to: For persona
Slide 3: Disclaimer (cont'd)
DISCLAIMER (CONT’D) Past performance Past performance and pro forma historical information in this Presentation is given for illustrative purposes only and should not be relied on (and is not) an indication of future performance including For personal use only future share price information. Histori
Slide 4: I. Transaction Summary and Strategic Highlights
For personal use only I. TRANSACTION SUMMARY AND STRATEGIC HIGHLIGHTS
Slide 5: Acquisition Summary
ACQUISITION SUMMARY IRESS acquires a leading provider of financial services technology in the UK For personal use only • IRESS to acquire Avelo for £210 million cash purchase price1 • Consistent with IRESS’ existing growth strategy • Compelling opportunity for IRESS to acquire market leading revenue
Slide 6: Strategic Highlights: Achieves objective of technology scale in the UK
STRATEGIC HIGHLIGHTS Achieves IRESS’ objective of technology scale in the UK For personal use only • Unique opportunity for scale, revenue and relationship footprint in UK • Significantly builds on IRESS’ organic success to date and relevance post RDR1 • Introduces UK mortgage sourcing and distribut
Slide 7: Strategic Highlights: Geographic and segment diversification
STRATEGIC HIGHLIGHTS Enlarged group to benefit from greater geographic and segment diversification For personal use only IRESS Avelo Pro Forma United Kingdom 0.6% Asia 0.6% By Geography South Africa United 10.1% Kingdom 31.7% Australia & Revenues (Last 12 Months) Australia & Canada New Zealand New Z
Slide 8: Strategic Highlights: Combined product strengths and capability
STRATEGIC HIGHLIGHTS Combined product strengths and capability to accelerate joint revenue opportunities For personal use only Wealth Management Business & Product Segments Intermediary & Distributor Sourcing Enterprise Solutions Advice & Back Office Capability Mortgage & Mortgage & Life, Pensions,
Slide 9: Strategic Highlights: Regulatory change drives technology demand
STRATEGIC HIGHLIGHTS Regulatory change is a key driver for technology demand For personal use only • Opportunity created by UK regulatory change is driving demand for technology solutions through compliance and commercial responses • IRESS has track record of maximising such opportunities • Combined
Slide 10: Financial Highlights
FINANCIAL HIGHLIGHTS Expected to be more than 10% EPS accretive on an underlying basis in CY20141 For personal use only • Total purchase price of £210 million in cash2 • Cost synergies of between $3-4 million p.a., fully realised in 2015. Associated one-off implementation costs of approximately $5 m
Slide 11: II. Offer Summary
For personal use only II. OFFER SUMMARY
Slide 12: Entitlement Offer Summary
ENTITLEMENT OFFER SUMMARY • 2 for 9 pro rata accelerated renounceable entitlement offer to raise approximately $206 million For personal use only • Approximately $155 million institutional component and $51 million retail component Offer Structure and Size • The offer is fully underwritten by Goldma
Slide 13: Offer Timetable
OFFER TIMETABLE For personal use only Trading halt, Institutional Entitlement Offer opens 06-Aug-2013 Institutional Entitlement Offer closes 07-Aug-2013 Institutional shortfall bookbuild 08-Aug-2013 Record Date for eligibility in the Entitlement Offer (7.00pm Melbourne) 09-Aug-2013 Retail Entitlemen
Slide 14: III. Overview of Avelo
For personal use only III. OVERVIEW OF AVELO
Slide 15: Overview of Avelo
OVERVIEW OF AVELO Avelo is a leading financial services technology provider in the UK For personal use only Wealth Management Enterprise Solutions FY13 Revenue FY13 Revenue £38.0m / 68.5% £17.5m / 31.5% Highly recurring, subscription Contracted services revenue • Leading market share and comprehensi
Slide 16: Overview of Avelo: Key Milestones
OVERVIEW OF AVELO: KEY MILESTONES Market leading position established over time For personal use only 2008 2010 2011 2011 2012 1st Software and 1st -The Exchange 1st -The Exchange The Exchange acquired N4 acquired Screen Rebranded as Avelo acquired combined Solutions Business Avelo Trigold 2013 1991
Slide 17: Overview of Avelo: Wealth Management
OVERVIEW OF AVELO: WEALTH MANAGEMENT Mirrors IRESS’ existing wealth management product capability For personal use only • Technology offering and client base broadly overlapping with IRESS’ existing wealth management segment • Strong financial profile with visibility from recurring revenue model and
Slide 18: Overview of Avelo: Enterprise Solutions
OVERVIEW OF AVELO: ENTERPRISE SOLUTIONS Leading product and high growth opportunity For personal use only • Engages in the development, customisation and configuration of large scale software solutions in mortgage sourcing and origination (MSO) • Contracted services revenue, augmented by infrequent
Slide 19: Overview of Avelo: Product and Client Map
OVERVIEW OF AVELO: PRODUCT AND CLIENT MAP Avelo has a broad range of software and client interactions across the value chain For personal use only Consumers Financial Advice & Services D2C Intermediary Software Advice & Mortgage Mortgages (subscription revenue) Intermediaries Distribution Networks A
Slide 20: Overview of Avelo: Financial Summary
OVERVIEW OF AVELO: FINANCIAL SUMMARY Stable revenue base and highly profitable business well positioned for growth For personal use only Revenue (£m)1 – March Year End 55.5 • Avelo has generated meaningful growth in 49.0 revenue, supported by organic growth and 43.8 17.5 acquisitions 15.6 11.7 • Wea
Slide 21: IV. Synergies and Implementation
For personal use only IV. SYNERGIES AND IMPLEMENTATION
Slide 22: Synergies
SYNERGIES Modest synergies provide additional positive financial impact For personal use only • Focus on maintaining superior client service and delivery capability • Cost synergies of between $3-4 million p.a., fully realised in 2015, comprising: • Technology platform alignment over time • Benefits
Slide 23: Implementation
IMPLEMENTATION Commitment to successful implementation overseen by Andrew Walsh, IRESS CEO For personal use only • IRESS UK to be led by current Avelo CEO, Simon Badley, reporting to Andrew Walsh • Mark Thelwell, current IRESS UK MD, responsible for XPLAN strategic positioning and delivery of commit
Slide 24: V. Acquisition Funding, Balance Sheet and Dividends
For personal use only V. ACQUISITION FUNDING, BALANCE SHEET AND DIVIDENDS
Slide 25: Acquisition Funding
ACQUISITION FUNDING Equity raising to support overall funding requirements For personal use only • IRESS balance sheet maintains significant flexibility • Purchase price in Australian dollars secured through currency hedging arrangements • Sources and uses for the Avelo acquisition are: Sources1 $m
Slide 26: Pro Forma Balance Sheet
PRO FORMA BALANCE SHEET IRESS will retain a strong balance sheet post transaction For personal use only Avelo assets & Total equity and IRESS liabilities acquired Total acquisition debt raising Pro forma $m 30-Jun-13 31-Mar-13 adjustments adjustments combined Cash assets 57.3 2.6 - - 59.8 Trade rece
Slide 27: Pro Forma Gearing Metrics
PRO FORMA GEARING METRICS IRESS will remain strongly capitalised with net debt to Segment Profit of 1.1x For personal use only Pro forma historical 1,2 Net debt ($m) 111 Net debt / Pro forma combined Segment Profit 1.1x Gearing (net debt / net debt + equity) 26.2% Interest cover ratio 12.8x (Pro for
Slide 28: Dividend Policy
DIVIDEND POLICY No change in group dividend policy For personal use only • Following the acquisition of Avelo, IRESS’ dividend policy is not changed • Maintain a payout ratio of not less than 80% of underlying group earnings (including growth investments) • Dividends will continue to be franked to t
Slide 29: Appendix A: Key Risks
For personal use only APPENDIX A: KEY RISKS
Slide 30: Key Risks: Introduction
KEY RISKS Introduction For personal use only Investors should be aware that there are risks associated with an investment in IRESS. Some of the principal factors that may, either individually or in combination, affect the future operating and financial performance of IRESS and the value of IRESS sha
Slide 31: Key Risks: Acquisition Risks
KEY RISKS Acquisition Risks For personal use only ● Completion risk There is a risk that the acquisition of Avelo may not complete due to a failure to satisfy a condition precedent in the sale and purchase agreement. The only condition precedent relates to approval by the Financial Conduct Authority
Slide 32: Key Risks: Acquisition Risks (cont'd)
KEY RISKS Acquisition Risks (Cont’d) For personal use only ● Reliance on information provided IRESS undertook a due diligence process in respect of Avelo, which relied in part on the review of financial and other information provided by the vendors of Avelo. Despite making reasonable efforts, IRESS
Slide 33: Key Risks: Operational Risks
KEY RISKS Operational Risks For personal use only ● Competition IRESS’ position as a market leader in markets which are characterised by rapid technological developments and competitive pressures means that it is susceptible to aggressive competitive behaviour. Typically, large financial service com
Slide 34: Key Risks: Operational Risks (cont'd)
KEY RISKS Operational Risks (Cont’d) For personal use only ● Infringement of intellectual property rights A large proportion of IRESS’ property is in the form of intellectual property. Infringements are not always easily identified, making protection and enforcement difficult. Unauthorised reproduct
Slide 35: Key Risks: General Risks
KEY RISKS General Risks For personal use only ● Market Investors should be aware that there are risks associated with any investment in a company listed on ASX. The market value of IRESS shares will fluctuate depending on the price at which IRESS shares are traded on ASX, and may rise above or below
Slide 36: Key Risks: Risks associated with renouncing rights
KEY RISKS Risks associated with renouncing rights For personal use only If you are a shareholder and renounce your entitlement (including by doing nothing under the Entitlement Offer), there is no guarantee that any value will be received for your renounced entitlement through the bookbuild process.
Slide 37: Appendix B: International Selling Restrictions
For personal use only APPENDIX B: INTERNATIONAL SELLING RESTRICTIONS
Slide 38: International Selling Restrictions: New Zealand
INTERNATIONAL SELLING RESTRICTIONS For personal use only New Zealand The offer of entitlements and New Shares under the Institutional Entitlement Offer, Institutional Bookbuild and Retail Bookbuild referred to in this Presentation is made in New Zealand only to investors: a) whose principal business
Slide 39: International Selling Restrictions: Singapore
INTERNATIONAL SELLING RESTRICTIONS For personal use only Singapore This document and any other materials relating to the entitlements and the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this docum
Slide 40: International Selling Restrictions: Germany
INTERNATIONAL SELLING RESTRICTIONS For personal use only Germany The information in this document has been prepared on the basis that all offers of entitlements and New Shares will be made pursuant to an exemption under the Directive 2003/71/EC ("Prospectus Directive"), as amended and implemented in
Slide 41: International Selling Restrictions: Switzerland
INTERNATIONAL SELLING RESTRICTIONS For personal use only Switzerland The entitlements and the New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in Switzerland. This document has