Computershare Limited · ASX:CPU
Computershare — H1 2016 Earnings Presentation
53 slides from Computershare's earnings presentation, Feb 10, 2016
Slide 1: Computershare Limited 2016 Half Year Results Presentation
COMPUTERSHARE LIMITED 2016 Half Year Results Presentation Stuart Irving Chief Executive Officer and President Mark Davis Chief Financial Officer 10 February 2016
Slide 2: 1H16 overview
1H16 overview Simpler, more transparent and disciplined CPU emerging with focus on building and protecting scale in core markets to drive operating leverage, profitable growth and improved returns › Resilient performance - Total management revenue $1,007.6m, +5.0% ($959.5m pcp) - Management EBITDA $
Slide 3: Executive summary
Executive summary Results overview Total management revenue Management EBITDA Actual Constant Currency1 Actual Constant Currency $938.7m $1,007.6m $242.3m $258.2m 2.2% 5.0% 6.6% 0.4% Management earnings per share (EPS) Statutory earnings per share (EPS) Actual Constant Currency Actual 25.98 cents 27
Slide 4: FY16 outlook
FY16 outlook Guidance › We previously said that we expected the Group’s underlying business performance to be broadly similar to FY15 but we anticipated Management EPS would be around 7.5% lower than FY15 primarily due to the dual effects of the stronger USD and lower yields on client balances. We r
Slide 5: Contents
Contents Section Title Page 1 Company overview 6 2 Financial performance 7 3 Operating review 11 4 Growth opportunities and execution priorities 22 5 Conclusion 25 6 Appendices 26 5
Slide 6: 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 7: 1H16 Computershare - at a glance
1H16 Computershare - at a glance Management revenue Management EBITDA Canada ANZ ANZ Canada 9% 7% 15% 16% Asia By geography 10% Asia 7% $938.7m $242.3m UCIA UCIA USA 18% 24% 48% USA CEU 43% CEU 3% 0% Communication Technology & other Communication Technology & other Services 2% Services 5% 9% 7% Empl
Slide 8: Results summary
Results summary Comparison in constant currency 1H16 Actual 1H16 @ CC 1 1H15 Actual CC Variance Total Management Revenue $938.7 $1,007.6 $959.5 Up 5.0% Operating Costs $695.7 $748.8 $699.0 Up 7.1% Management EBITDA $242.3 $258.2 $259.3 Down 0.4% EBITDA Margin % 25.8% 25.6% 27.0% Down 140bps Manageme
Slide 9: 1H16 management NPAT analysis
1H16 management NPAT analysis Overall operating performance largely unchanged 170.0 3.1 1.9 10.5 160.0 160.6 3.7 2.8 3.5 150.0 3.0 2.6 0.1 10.1 1.8 150.4 6.6 143.8 140.0 130.0 USD million 120.0 110.0 100.0 1H15 USA CANADA ANZ UCIA ASIA CEU TECH & Interest Dep'n & Tax NCI 1H16 FX 1H16 NPAT EBITDA EBI
Slide 10: Management EPS FX impact
Management EPS FX impact Management EPS – USD vs. AUD › In all operating jurisdictions our revenue currency matches our cost currency › Reporting in USD inherently reduces FX translation volatility, given material contribution of US businesses to the Group › For Australian investors, AUD equivalent
Slide 11: Management revenue breakdown
Management revenue breakdown Comparison in constant currency Revenue stream 1H16 Actual 1H16 @ CC 1H15 Actual CC Variance Register Maintenance $342.0 $367.1 $387.3 Down 5.2% Corporate Actions $76.9 $82.6 $72.8 Up 13.5% Business Services $287.9 $302.5 $245.8 Up 23.1% Employee Share Plans $104.8 $112.
Slide 12: Management revenue bridge
12 700 800 850 900 950 750 1,000 1,050 1H15 Operating 959.5 Revenue Register Maintenance 21.2 Corporate 8.5 Actions Business Services 59.9 Stakeholder 10.7 Relationship Mgt Management revenue bridge Employee 5.9 Share Plans Communication 1.7 Services Technology & 1.9 Other Revenue Margin Income 4.2
Slide 13: Client balances and margin income
Client balances and margin income Yield pressure continues but balances remain steady 18 16 16.7 Effective hedging natural 8% 15.1 15.2 15.0 14 ($1.2bn) 14.4 14.0 Pre-hedged exposure 13.6 Effective hedging derivative 12 / fixed rate 29% 120.0 ($4.3bn) 10 USD billion 104.9 105.8 Exposure to interest
Slide 14: Client balances yield comparison
Client balances Assuming current Yield comparison balances remain steady and CPU is able to achieve an increase 3.0% of 100bps in yield in future periods, an additional $150m of 2.5% EBITDA per annum would be earned 2.0% 1.5% 1.0% 0.5% 0.0% Jun-09 Jun-18 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun
Slide 15: EBITDA by business stream
EBITDA by business stream Comparison in constant currency 1H16 1H16 @ 1H15 CC Variance 1H16 EBITDA Actual CC Actual Margin % Register Maintenance & Corporate Actions $125.2 $133.1 $127.3 Up 4.6% 29.9% Business Services $66.2 $71.7 $66.6 Up 7.7% 23.0% Employee Share Plans $22.6 $23.9 $33.4 Down 28.4%
Slide 16: Operating costs analysis
Operating costs analysis Costs in line with expectations with new initiatives underway Comparison in constant currency 1H16 Actual 1H16 @ CC 1H15 Actual CC Variance Cost of sales $164.0 $177.0 $165.0 Up 7.3% Controllable costs Personnel $342.9 $367.3 $342.4 Up 7.3% Occupancy $37.9 $40.8 $38.3 Up 6.5
Slide 17: Operating costs analysis: US premises rationalisation
Operating costs analysis US premises rationalisation – project on track Current Louisville migration - estimate of cost savings and one-off project costs to achieve › Expected project costs - USD 85-90 million › Expected annual cost savings - USD 25-30 million › Anticipated payback period - circa th
Slide 18: Cash flows
Cash flows 1H16 operating cash flows broadly in line with pcp 1H16 Actual 1H15 Actual Net operating receipts and payments $216.8 $225.6 Net interest and dividends ($25.0) ($23.9) Income taxes paid ($33.6) ($32.4) Loan servicing advances (net) ($183.8) ($21.7) Statutory operating cash flows ($25.6) $
Slide 19: SLS (US mortgage servicing) cash flows
SLS (US mortgage servicing) cash flows Cash flows have different statutory classifications and can fall across different reporting periods 1H16 1H15 Notes Actual Actual Loan Servicing Advances (net) ($183.8) ($21.7) Operating cash flow > Loan servicing advances are a working capital requirement of S
Slide 20: Balance sheet
Balance sheet Conservative with targeted gearing levels Dec 15 Jun 15 Variance Current Assets $1,254.2 $1,227.8 Up 2.2% › Increase in loan servicing advances have Non-Current Assets $2,540.0 $2,573.6 Down 1.3% been offset by the sale of VEM and Russian net assets, lower trade Total Assets $3,794.1 $
Slide 21: Capital management
Capital management Share buy-back › The Company announced on 18 August 2015 an on-market buy-back having an aggregate value of up to AUD 140 million. › As at 31 December 2015, the Company had acquired 7,196,706 ordinary shares for a total consideration of AUD 78.3 million at an average price of AUD
Slide 22: Growth opportunities and execution priorities
Growth opportunities and execution priorities Growth Strategy Execution Capital potential priorities employed US Registries Low › Reinforce leading market position › Optimise client satisfaction Low by broadening the product and › Improve returns driven by scale, costs services suite initiatives and
Slide 23: Growth opportunities and execution priorities
Growth opportunities and execution priorities Growth Strategy Execution Capital potential priorities employed UK Mortgage High › Leverage recent wins and new › Complete and integrate UKAR Minimal other than HML opportunities to drive revenue › Realise remaining HML acquisition acquisition earn-out S
Slide 24: Growth opportunities and execution priorities
Growth opportunities and execution priorities Growth Strategy Execution Capital potential priorities employed Margin Income High - › Continue to maintain and grow › Ensure ongoing compliance with Low subject to exposed balances approved framework › Optimise returns within approved › Monitor market r
Slide 25: Conclusions
Conclusions › Simpler, more transparent and disciplined CPU emerging with focus on building and protecting scale in core markets to drive operating leverage, profitable growth and improved returns › Resilient underlying business performance with EBITDA growth in largest business units › Sustainable
Slide 26: Appendices
APPENDICES Statutory results Financial performance by half year Management revenue by region Technology costs CAPEX versus depreciation Client balances Debt facility maturity profile Key financial ratios Effective tax rate Days sales outstanding Dividend history and franking Extract from CMC Changes
Slide 27: Statutory results
Statutory results 1H16 1H15 Vs 1H15 (pcp) Earnings per share (post NCI) 15.22 cents 2.79 cents Up 445.5% › Management results are used, along with other measures, to assess operating business Total Revenues $941.5m $959.5m Down 1.9% performance. The Company believes that exclusion of certain items p
Slide 28: Management adjusted items
Management adjusted items Appendix 4D Note 2 Management adjustment items net of tax for the half year ended 31 December 2015 were as follows: Amortisation › Customer contracts and other intangible assets that are recognised on business combinations or major asset acquisitions are amortised over thei
Slide 29: Financial performance by half year
Financial performance by half year 1H16 2H15 1H15 2H14 1H14 2H13 1H13 Total Management Revenue $938.7 $1,016.5 $959.5 $1,045.7 $976.9 $1,037.5 $987.6 Operating Costs $695.7 $720.7 $699.0 $771.7 $709.2 $767.6 $747.6 Management EBITDA $242.3 $294.8 $259.3 $273.6 $267.0 $268.4 $241.4 EBITDA Margin % 25
Slide 30: Australia
Australia Management revenue: AUD million 1H15 2H15 1H16 $193.5m $163.8m $184.9m 69.7 68.3 66.2 66.5 62.4 55.0 22.1 18.9 19.3 15.7 16.1 15.6 12.4 9.9 10.1 7.5 3.3 0.8 1.1 0.8 0.5 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions Services Relationsh
Slide 31: Hong Kong
Hong Kong Management revenue: HKD million 1H15 2H15 1H16 $282.6m $292.8m $299.0m 190.3 183.8 183.3 57.2 54.4 48.1 44.5 42.6 42.1 11.8 8.6 7.8 Register Corporate Stakeholder Employee Share Maintenance Actions Relationship Mgt Plans 31 1H15 2H15 1H16
Slide 32: India
India Management revenue: INR million 1H15 2H15 1H16 $1,246.3m $1,414.8m $1,384.7m 1,041.8 1,050.4 870.1 334.8 328.1 294.4 41.5 44.9 39.9 Register Corporate Business Maintenance Actions Services 32 1H15 2H15 1H16
Slide 33: United States
United States Management revenue: USD million 1H15 2H15 1H16 $409.3m $472.4m $455.3m 212.9 189.4 177.2 157.5 134.5 121.4 42.7 34.0 36.6 28.5 29.3 25.8 32.2 28.7 15.6 16.4 18.6 18.0 5.8 6.5 5.3 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions Servi
Slide 34: Canada
Canada Management revenue: CAD million 1H15 2H15 1H16 $106.6m $110.3m $104.8m 46.6 41.3 39.6 38.7 35.6 34.4 15.0 14.5 11.2 11.6 8.9 9.6 3.2 3.3 3.7 1.4 1.5 1.1 0.6 0.2 0.0 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions Services Relationship Mgt
Slide 35: United Kingdom and Channel Islands
United Kingdom and Channel Islands Management revenue: GBP million 1H15 2H15 1H16 $89.2m $114.5m $101.2m 49.2 47.3 33.3 31.9 31.3 26.8 21.5 21.1 20.3 5.1 1.8 2.2 2.3 2.1 1.6 2.1 0.7 1.3 0.8 0.8 1.4 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions
Slide 36: South Africa
South Africa Management revenue: RAND million 1H15 2H15 1H16 $125.4m $119.0m $121.7m 112.4 108.2 108.2 7.8 7.7 7.6 4.8 5.5 2.4 0.6 0.4 0.4 Register Corporate Stakeholder Employee Share Maintenance Actions Relationship Mgt Plans 36 1H15 2H15 1H16
Slide 37: Germany
Germany Management revenue: EUR million 1H15 2H15 1H16 $12.9m $25.7m $12.6m 12.9 9.5 8.6 8.2 2.8 2.3 1.9 1.2 0.7 0.8 0.7 0.6 0.5 0.4 0.1 Register Corporate Employee Share Communication Tech & Other Maintenance Actions Plans Services Revenue 37 1H15 2H15 1H16
Slide 38: Technology costs
Technology costs 14% 160 12.4% 12.3% 11.5% 12% 140 118.8 117.3 120 115.1 10% 5.6 Tech costs as a % of revenue 8.6 6.0 100 8% 32.2 30.3 31.6 USD million 80 6% 60 39.8 39.2 39.2 4% 40 2% 20 41.2 39.2 38.3 0 0% 1H15 2H15 1H16 Development Infrastructure Maintenance Admin Technology costs as a % of reven
Slide 39: Capital expenditure versus depreciation
Capital expenditure versus depreciation 25.6 25 1.7 20 7.8 0.8 15 13.9 13.0 0.9 USD million 0.6 0.9 2.7 1.3 10 0.5 15.3 5 10.2 9.9 0 1H15 2H15 1H16 Information Technology Communication Services Facilities Occupancy Other Depreciation 39
Slide 40: 1H16 client balances: interest rate exposure
1H16 client balances Interest rate exposure Average funds held during 1H16 › CPU had an average of USD 15.0bn of client funds under management during 1H16. Exposure to › For 35% (USD 5.3bn) of the 1H16 average interest rates client funds under management, CPU had no 28% exposure to interest rate mov
Slide 41: 1H16 client balances: exposed funds by currency
1H16 client balances Exposed funds by currency (1H16 average balances) Average exposed funds Average exposed funds balance prior to hedging balance net of hedging Other AUD 5% Other AUD 2% CAD 9% 5% 13% CAD 20% USD 43% USD 9.7bn USD 36% USD 4.2bn (USD 15.0bn x 65%) (USD 15.0bn x 28%) GBP 37% GBP 30%
Slide 42: Client balances: fixed and floating rate term deposits
Client balances Fixed and floating rate term deposits 7,000 Floating Rate Deposits Fixed Rate Deposits 6,000 5,000 USD million 4,000 3,000 2,000 1,000 0 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Fixed rate derivatives 1,000 Derivatives 800 600 USD million 400 200 0 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 42
Slide 43: Debt facility maturity profile
Debt facility maturity profile Maturity Dates Debt Committed Bank Private USD million Drawn Debt Debt Facility Placement Facilities Facility FY17 Dec-16 123.3 150.0 Dec-16 154.0 175.0 Mar-17 21.0 21.0 21.0 FY18 Jul-17 424.8 450.0 450.0 Feb-18 40.0 40.0 40.0 FY19 Jul-18 235.0 235.0 235.0 Feb-19 70.0
Slide 44: Key financial ratios
Key financial ratios Dec 15 Jun 15 Variance USD m USD m Dec 15 to Jun 15 Interest Bearing Liabilities $1,881.3 $1,769.1 6.3% Less Cash ($498.9) ($604.1)* (17.4%) Net Debt $1,382.4 $1,165.0 18.7% Management EBITDA $537.1 $554.1 (3.1%) Net Financial Indebtedness to EBITDA 2.57 times 2.10 times Up 0.47
Slide 45: Effective tax rate
Effective tax rate Statutory and management Tax rate % 63.3% › The decrease in the Group’s statutory effective tax rate from 63.3% in 1H15 to 24.9% in 1H16 is primarily driven by the 1H15 asset impairment of 35.3% $109.5m, which is not tax deductible. 26.1% 24.9% 24.1% 23.0% › The increase in the Gr
Slide 46: Days sales outstanding
Days sales outstanding 53 50 48 48 46 45 45 40 42 30 No. of days 20 10 0 1H13 2H13 1H14 2H14 1H15 2H15 1H16 46
Slide 47: Dividend history and franking
Dividend history and franking 16.5 100% 90% 16.0 16 16 80% 15.5 70% 60% 15.0 15 15 50% AU cents 14.5 40% 14.0 30% 14 14 14 20% 13.5 10% 13.0 0% 1H13 2H13 1H14 2H14 1H15 2H15 1H16 Dividend (AU cents) Franking (%) 47
Slide 48: Extract from CMC acquisition presentation – Transaction summary
Extract from CMC acquisition presentation – 4 Feb 2016 Transaction summary - Strong strategic fit and financially compelling acquisition Overview of CMC Acquisition rationale › Leading service provider to mortgage originator clients (known › Secures regular flow of new origination MSR for CPU at bel
Slide 49: Extract from CMC acquisition presentation – Acquisition rationale
Extract from CMC acquisition presentation – 4 Feb 2016 Acquisition rationale › CMC’s co-issue program will be the upstream provider of a substantial and consistent flow of MSRs for CPU at discounts to auction prices Leading co-issue program and service provider to originators Mortgage servicing leve
Slide 50: Extract from CMC acquisition presentation – Enhancing returns
Extract from CMC acquisition presentation – 4 Feb 2016 Enhancing returns › CPU provides CMC with capital and capability to service an increasing MSR purchasing program at enhanced ROIC FY17 FY18 FY19 FY20 Indicative monthly MSR purchase volume $500m $750m $1,000m $1,000m Indicative monthly average i
Slide 51: Changes to Board positions and committees
Changes to Board positions and committees Effective November 2015 Simon Jones, formerly Lead Independent Director, appointed to the position of Chairman Tiffany Fuller replaced Simon Jones as Chair of the Risk and Audit Committee Joe Velli replaced Nerolie Withnall as Chair of the Remuneration Commi
Slide 52: Exchange rates
Exchange rates › Average exchange rates used to translate profit and loss to US dollars Currency 1H16 FY15 1H15 USD 1.00000 1.00000 1.00000 AUD 1.38432 1.19208 1.10921 HKD 7.75084 7.75359 7.75365 NZD 1.52080 1.28103 1.22548 INR 65.37094 61.87461 60.96397 CAD 1.31020 1.16655 1.10205 GBP 0.65054 0.632
Slide 53: 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