Perpetual Limited · ASX:PPT
Perpetual — Perpetual Trustees Australia — Presentation to Macquarie Equities (November 2004)
56 slides from Perpetual's conference presentation, November 2004
Slide 1: Perpetual Trustees Australia Limited
Perpetual Trustees Australia Limited (“Perpetual”) November 2004 Presentation to Macquarie Equities
Slide 2: Content
Content • Business and Financial Overview • Business operations – Wealth Management • Business operations – Corporate Trust • Strategy • Capital Management • Global Equities Initiative 1
Slide 3: Who is Perpetual?
Who is Perpetual? • Publicly listed Australian financial services company and largest independent wealth manager in Australia* • Top performing manager in Australian equities • $23 billion FUM in September 2004 • Over the last 9 years the company has been transformed from a traditional trustee busin
Slide 4: Perpetual Trustees Australia Limited
Perpetual Trustees Australia Limited MD’s Office Finance Asset Wealth Corporate Management Human Resources Management Trust Information Technology Perpetual Investments Debt Markets Legal & Secretariat Private Clients Fund Services Wilson Dilworth Risk & Compliance 3
Slide 5: Track record of continued profit growth
Track record of continued profit growth Operating Profit after Tax EPS* A nnua l A n nu al g rowth g ro w th $100M 250¢ 30.2% 232 2 8 .9 % 88.2 80 200 181 68.2 156 60 58.7 150 109 40.7 40 100 84 30.7 20 50 0 0 Jun Jun Jun Jun Jun Ju n Jun Ju n Ju n Jun 00 01 02 03 04 00 01 02 03 04 *Calculated using
Slide 6: Revenues up 10% in 2004 driven by strong growth in asset volumes
Revenues up 10% in 2004 driven by strong growth in asset volumes Funds Under Advice & Funds Under Management Funds Under Administration Administration Wealth Management Corporate Trust* Wealth Management $25B $10B $125B 112.4 21.7 Preliminary Funding 20 19.4 8 100 17.4 87.1 6.6 15.6 6.2 5.8 6.0 15 6
Slide 7: 26% growth in EBITDA in 2004
26% growth in EBITDA in 2004 EBITDA EBITDA June 2004 June 2003 % Change Wealth Management $115.4m $91.6m +26% Corporate Trust $25.9m $23.6m +10% Group unallocated $2.3m ($1.6m) - TOTAL $143.6m $113.6m +26% 6
Slide 8: A strong, clean balance sheet
A strong, clean balance sheet June 2004 June 2003 % Change Net assets $315.4m $287.4m +10% Investments at cost $60.1m $68.8m (13%) Investments at market value $109.5m $102.1m +7% Cash holdings $163.4m $113.2m +44% Key Financial Ratios Gross debt to book equity 14% 17% Interest coverage 57x 38x 7
Slide 9: Continuing to improve shareholder value
Continuing to improve shareholder value Return on Shareholders Equity 30% 29.3% 25.1% 25 23.9% 20 18.9% 17.4% 15 10 5 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 *Based on Operating Profit after Tax and average shareholders equity 8
Slide 10: Five year performance
Five year performance Growth Rate % Performance measures Units 2000 2001(4) 2002(4) 2003(4) 2004 (1) Revenue from trading operations $m 238.9 290.9 248.2 267.8 295.2 5.4% Net investment income $m 6.3 9.2 8.4 11.0 10.8 14.4% Total revenue $m 245.2 300.1 256.6 278.8 306.0 5.7% EBITDA $m 71.4 82.0 100.
Slide 11: Content
Content • Business and Financial Overview • Business operations – Wealth Management • Business operations – Corporate Trust • Strategy • Capital Management • Global Equities Initiative 10
Slide 12: Defining the Wealth Management Value Chain
Defining the Wealth Management Value Chain • In order to understand the dynamics of the Perpetual Wealth Management business, it is useful to consider in which parts of the industry value chain the business operates in: Administration Advice Manufacturing of Product Packaging Investment Returns Core
Slide 13: Wealth Management - Operational and Financial Overview
Wealth Management - Operational and Financial Overview • Perpetual Investments – - Over the last 10 years compulsory superannuation has been a major contributor to FUM inflows, regulation will continue to support and grow the industry - 70% of revenues relate to the fund management business - curren
Slide 14: Strong growth for Wealth Management
Strong growth for Wealth Management • Cost saving targets achieved • Continued excellent investment performance - numerous awards • Funds under management up 25% from 2003 to 2004 • Successful launch of WealthFocus and other products • Dedicated wholesale client team • Good growth in advice business
Slide 15: Wealth Management EBITDA up 26% in 2004
Wealth Management EBITDA up 26% in 2004 June 2004 June 2003 % Change Revenues Perpetual Investments $177.3m $158.0m +12% Private Clients $54.5m $51.9m +5% Wilson Dilworth $14.0m $13.6m +3% Total Revenues $245.8m $223.6m +10% Expenses $130.4m $132m (1%) EBITDA $115.4m $91.6m +26% 14
Slide 16: Superior investment performance in Australian Equities
Superior investment performance in Australian Equities Excess over benchmark (3 Year rolling excess performance) % Variance to Benchmark 10% 8 Australian Equities 5 3 0 -3 -5 Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar Jun 02 02 02 03 03 03 03 03 03 04 04 04 Benchmarks based on: • Australian Equitie
Slide 17: Performance well recognised by the market
Performance well recognised by the market Money Management / • Fund Manager of the Year 2004 ASSIRT Awards • Australian Equities Fund Manager of the Year 2004 • Fund Manager of the Year 2003 Morningstar Awards • Australian Equities Fund Manager of the Year 2003 • Australian Multi-Sector Fund Manager
Slide 18: Funds under management up 25% in 2004
Funds under management up 25% in 2004 FUM Balance ($B) $22B 21.7 21.7 Diversified 20 19.4 Institutional & Property Mortgages, 18 17.4 Fixed Interest, 16 15.6 Cash Retail International Equity 14 12 11.6 10 8 Australian Equities 6 Masterfund 4 2 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 04 17
Slide 19: $1.5 billion in net inflows in 2004
$1.5 billion in net inflows in 2004 June 2004 FUM Net inflows Other* June 2003 FUM Retail $6.6B ($0.1B) $0.7B $6.0B Masterfund $11.7B $1.0B $1.5B $9.2B Institutional $3.4B $0.6B $0.6B $2.2B All Channels $21.7B $1.5B $2.8B $17.4B Australian Equity $13.9B $1.3B $2.1B $10.5B Other $7.8B $0.2B $0.7B $6.
Slide 20: Middle of the value chain will be squeezed
Middle of the value chain will be squeezed • Asset managers who can add • Consolidated • Advisers and alpha will differentiate reporting by dealers can craft themselves and charge a administrators value proposition premium becoming harder to around provision of differentiate tailored, trusted financ
Slide 21: Content
Content • Business and Financial Overview • Business operations – Wealth Management • Business operations – Corporate Trust • Strategy • Capital Management • Global Equities Initiative 20
Slide 22: Corporate Trust - Operational and Financial Overview
Corporate Trust - Operational and Financial Overview • Corporate Trust clients are offered services through two main areas: - Debt markets which provides securitisation and corporate and structured finance services to the debt capital market - Fund services which provides responsible entity, propert
Slide 23: Steady growth in Corporate Trust
Steady growth in Corporate Trust • Growth driven by strong Securitisation volumes - Securitisation revenues up 18% - Increase in offshore demand for RMBS - Bank of New York global alliance • Tighter criteria on corporate & structured finance business • Investing in capabilities - Administrative serv
Slide 24: Corporate Trust EBITDA up 10% in 2004
Corporate Trust EBITDA up 10% in 2004 June 2004 June 2003 % Change Revenues $49.4m $44.2m +12% Expenses $23.5m $20.6m +14% EBITDA $25.9m $23.6m +10% 23
Slide 25: Funds Under Administration Corporate Trust
Funds Under Administration Corporate Trust Funds Under Administration Corporate Trust* $125B 112.4 Preliminary 100 Funding 87.1 75 52.3 50 42.2 Securit isation 28.0 25 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 24
Slide 26: Increasing offshore demand for RMBS
Increasing offshore demand for RMBS Issuances ($B) RMBS Issuances $50B 44.8 40 30.9 Offshore 30 28.1 20 16.0 13.7 10 Domestic 0 1999 2000 2001 2002 2003 No of deals 37 29 35 42 62 Source: S&P Note: Year to December 25
Slide 27: Content
Content • Business and Financial Overview • Business operations – Wealth Management • Business operations – Corporate Trust • Strategy • Capital Management • Global Equities Initiative 26
Slide 28: Strategy drivers
Strategy drivers • Growth was driven by two successful, established businesses • Heavy portfolio concentration in Australian equities • Need to develop long-term growth prospects 27
Slide 29: An excellent foundation
An excellent foundation • Markets rebounded External • Investor confidence returning • Mandated growth in retirement savings • Securitisation volumes growing • Investment performance remains strong • Trusted brand Internal • Core businesses with strong market presence • Talented team keen to sustain
Slide 30: Our new Strategy
Our new Strategy Focus on our 4 sources of I. Develop a more balanced competitive advantage II. Develop new growth engines portfolio III. Fully engage the staff to deliver our strategy 29
Slide 31: Four sources of competitive advantage underpin our strategy
Four sources of competitive advantage underpin our strategy 1. The management of funds management teams, philosophies and processes 2. Relationship management with financial planning community 3. A trusted brand 4. A long history as a leading provider of fiduciary services to individuals and corpora
Slide 32: 2005 Implementation: Develop a more balanced portfolio
2005 Implementation: Develop a more balanced portfolio • Continuing focus on costs • Trust industry opportunities • Full potential from Advice businesses • Broaden range of funds management products 31
Slide 33: Continuing focus on costs
Continuing focus on costs • Extract synergies from existing businesses • More variable cost structure - New remuneration policy • Shifting costs and investing in higher value adding activities - Asset management - Marketing - Product development and management - Strategy and project management - Who
Slide 34: Trust industry opportunities
Trust industry opportunities • Enthusiastic participant in the Trust industry • Interested party in consolidation • Will only look to value accretive opportunities 33
Slide 35: Advice strategy: Priorities for 2005
Advice strategy: Priorities for 2005 • Expand product range and adjust pricing • Align staff capabilities with client needs • Expand marketing activities 34
Slide 36: Broaden range of funds management products
Broaden range of funds management products • Growth pensions Add products from existing capabilities • Managed discretionary accounts • Quantitative Investment market neutral • Mezzanine pooled fund Add products from • Stock portfolio with capital protection new capabilities • Property income fund •
Slide 37: 2005 Implementation: Develop new growth engines
2005 Implementation: Develop new growth engines • Build capability in new investment skill sets • Expand range of Corporate Trust services 36
Slide 38: Build capability in new investment skill sets
Build capability in new investment skill sets Fixed Interest Capability High Low Skill set breadth breadth Domestic Small Hedge Private Broad Styles Stock Picking Caps Funds Equity Mortgage Mortgages Mezz Lending Debt Recently LPT Global Domestic added Stock Picking capability Infrastructure Infra-
Slide 39: 2005 Implementation: Fully engage the staff to deliver our strategy
2005 Implementation: Fully engage the staff to deliver our strategy • New remuneration policy • Single premises • Leadership team development 38
Slide 40: Staff remuneration aligned with shareholders
Staff remuneration aligned with shareholders • Incentives are a significant part of our remuneration • Paid from profits - not budgeted as fixed costs • Reward people when performance significantly exceeds expectations • Equity participation to encourage ownership and long term focus 39
Slide 41: Content
Content • Business and Financial Overview • Business operations – Wealth Management • Business operations – Corporate Trust • Strategy • Capital Management • Global Equities Initiative 40
Slide 42: Future gearing policy
Future gearing policy • Desire to have a balance sheet that, if rated, would have an investment grade rating • Reflects financial conservatism appropriate for a company involved in investment management and trust activities and supports business stability • Financial ratio guidelines: - Debt/Book eq
Slide 43: Capital requirements
Capital requirements Capital retained to provide for: • Regulatory capital requirements • Seed capital and contingency margin • Growth initiatives • Working capital requirements • Subject to no alternative potential investment opportunities being available at the time, consideration will be given to
Slide 44: Future dividend policy
Future dividend policy • Strong cash generation Future dividend policy • Low capital expenditure Ordinary dividends of • Substantial franking credits 90% of NPAT before goodwill amortisation and gains / losses on investments, fully franked • High dividend pay-out ratio 43
Slide 45: Content
Content • Business and Financial Overview • Business operations – Wealth Management • Business operations – Corporate Trust • Strategy • Capital Management • Global Equities Initiative 44
Slide 46: Adding a global stock picking capability
Adding a global stock picking capability High Low Skill set breadth breadth Domestic Small Hedge Private Broad Styles Stock Picking Caps Funds Equity Mortgage Mortgages Mezz Lending Debt Recently LPT Global Domestic added Stock Picking Global capability Infrastructure Infra- Equities Investing struc
Slide 47: Perpetual will create its own global equities business
Perpetual will create its own global equities business Business strategy • Manufacture a focused range of global equities products includes: • Distribution of these products to: • Retail and institutional investors in Australia • Institutional investors outside of Australia Perpetual Trustees Austra
Slide 48: Key points: Perpetual Global Equities
Key points: Perpetual Global Equities • Secured outstanding Global Equities investment capabilities based in Dublin • Strategy incorporates the best of “Greenfield” and “acquisition” options Strategic • Supports Perpetual’s new strategy for developing new growth engines and development balancing the
Slide 49: Global equities presents a significant opportunity for Perpetual
Global equities presents a significant opportunity for Perpetual Global equities is a very large market… …with growing market share in Australia Australian asset allocation in Global Equity Global equities (% of total) FUM (USD) $2,000B 25 20 1,500 15 1,000 10 500 5 0 0 y n K lia 6 9 02 S al 97 98 0
Slide 50: Perpetual's new Global Equities group is outstanding with a strong cultural fit
Perpetual’s new Global Equities group is outstanding with a strong cultural fit • Bottom-up stock pickers Philosophy aligned with Perpetual • Strong investment results • Value bias • Worked together for the last ten years A high quality, stable group • Industry experience average exceeds 22 years •
Slide 51: Perpetual will initially have a team of ~16 in Dublin
Perpetual will initially have a team of ~16 in Dublin • Des Sullivan and John Nolan will be Chief Investment Officers for Perpetual Global Equities – responsible to Emilio Gonzalez, Perpetual CIO Core investment team • Richard Kelly and John Forde - Senior Portfolio managers hired • 4 of 8 positions
Slide 52: Long-term incentive program
Long-term incentive program • $28m in PTAL shares issued to the investment team and to be held in trust • Vesting subject to achievement of revenue targets • Range of outcomes: $0 to $28m • Vests over seven years • Issue price determined as the weighted average price of PTAL shares in the five tradi
Slide 53: Indicative timeline
Indicative timeline Sep 04: Perpetual announces Global Equity strategy Sep 04: Irish company formed and execution of strategy begins • Licensing application • HR recruiting team members • Premises being selected • Systems infrastructure being developed • Investment processes to be developed • Resear
Slide 54: Conclusion - A busy year
Conclusion - A busy year Y Corporate strategy in place Y Expanded asset management footprint Y New products created Y Advice strategy being implemented Y Integrated Wealth Management division Y Capital management policy in place Y New remuneration policy in place Y Refreshed corporate values Y New p
Slide 55: Good start to 2005
Good start to 2005 • Starting FUM and FUA balances position us for continued increase in revenues • Continuing focus on costs • Increased fund flows as markets remain positive • At this early stage of the year: • operating profit (before gains on investment sales and significant items) for the first
Slide 56: Why Perpetual
Why Perpetual • Independent wealth manager • Fund Manager of the Year three times • Top performer in Australian equities • One of Australia’s largest wealth management pure plays • Emerging global option 55
Perpetual Trustees Australia — Presentation to Macquarie Equities (November 2004) on 6ix