Mcmillan Shakespeare Limited · ASX:MMS
Mcmillan Shakespeare — Macquarie Securities Conference May 2013
39 slides from Mcmillan Shakespeare's conference presentation, May 2, 2013
Slide 1: MMS Group - Macquarie Securities Conference May 2013
MMS Group For personal use only Macquarie Securities Conference May 2013
Slide 2: Company overview
Page 2 Macquarie Securities Conference – May 2013 For personal use only Company overview Provider of salary packaging administration and integrated fleet management services with unique competitive strengths. Group has two segments: - The Group Remuneration Services (GRS) - provides administrative s
Slide 3: Normalised NPAT
Page 3 Macquarie Securities Conference – May 2013 For personal use only Normalised(1) NPAT 54.3 55 50 45 NPAT 7-year CAGR of 40% 43.5 40 35 ($m) 30 27.9 25 20.5 20 17.4 15 13.2 11.3 10 5.2 5 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Note 1: Normalised NPAT excludes the profit recognised on acquisiti
Slide 4: Historical earnings and dividends per share
Page 4 Macquarie Securities Conference – May 2013 For personal use only Historical earnings and dividends per share Normalised (1) earnings per share (EPS) Total dividends per share 90.0 50.0 Basic EPS 7-year CAGR of 38.2% 80.0 45.0 70.0 40.0 60.0 35.0 50.0 cents 30.0 cents 40.0 25.0 30.0 20.0 20.0
Slide 5: Normalised return on equity (ROE)
Page 5 Macquarie Securities Conference – May 2013 For personal use only Normalised(1) return on equity (ROE) 50% 45% 43% 43% 40% 39% 39% 39% 38% 35% 36% 30% % 25% 24% 20% 15% 10% 5% 0% FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Normalised ROE Note 1: Normalised ROE excludes the profit recognised on acq
Slide 6: Integrated model - unique market position
Page 6 Macquarie Securities Conference – May 2013 For personal use only Integrated model - unique market position Core Skills Core Skills Operating Lessors/ Fleet Managers Proactive sales culture Managing vehicle Retail sales and value chain: marketing procurement, Salary Packagers Budgeting/ BPO No
Slide 7: Unique business model underpinned by key competitive strengths
Page 7 Macquarie Securities Conference – May 2013 For personal use only Unique business model underpinned by key competitive strengths World class service levels (as independently measured by net promoter methodology). Low delivered cost (expense ratio in GRS segment reduced from 75% in 2005 to 56%)
Slide 8: Remuneration Services competitive strengths and performance indices
Page 8 Macquarie Securities Conference – May 2013 For personal use only Remuneration Services competitive strengths and performance indices Group Remuneration Services Productivity Index (7/08 = 100) MMS Customer Satisfaction Index [Rolling 3 month Revenue (ex Float Interest) / FTE] December 2008 =
Slide 9: Asset Management competitive strengths
Page 9 Macquarie Securities Conference – May 2013 For personal use only Asset Management competitive strengths Low cost of funds. Vehicle disposal methodology. Salary packaging capability.
Slide 10: Revenue model
Page 10 Macquarie Securities Conference – May 2013 For personal use only Revenue model Remuneration Services Salary packaging administration fees: - Annuity income stream; paid directly and regularly from employees’ salary. Interest income on float. Facilitation and procurement fees for assisting wi
Slide 11: Tax benefits for charities and public health from salary packaging
For personal use only Page 11 Benefit $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000 $85,000 Salary $90,000 Health $9,095 $95,000 $100,000 Yearly benefit schedule $105,000 $110,000 $115,000 $120,000 $125,000 $130,00
Slide 12: Tax benefits from novated leasing
Page 12 Macquarie Securities Conference – May 2013 For personal use only Tax benefits from novated leasing Cost of motor vehicle - $33,600 Statutory fraction for 15,000-24,999km - 20% Benefit $6,000 $5,000 $4,000 20%(15-24,999km) $3,000 $2,000 $1,000 $0 $30,000 $35,000 $40,000 $45,000 $50,000 $55,00
Slide 13: 1HFY13 key points
Page 13 Macquarie Securities Conference – May 2013 For personal use only 1HFY13 key points Integrated business performing strongly. Ongoing strong profitable growth in Group Remuneration Services segment. Operating margins improved. Assets under finance and management growth. Integrated model contin
Slide 14: 1HFY13 key points (cont'd)
Page 14 Macquarie Securities Conference – May 2013 For personal use only 1HFY13 key points (cont’d) Business remains resilient in the face of ongoing economic turmoil. Leading indicators appear strong. We have entered into a joint venture company with an experienced local management team to launch o
Slide 15: Financial highlights
Page 15 Macquarie Securities Conference – May 2013 For personal use only Financial highlights Consolidated NPAT of $29.7m (19.4% growth on PCP, ex interest on the float, 25.6%). Group Remuneration Services NPAT of $22.0m (19.0% growth on PCP, ex interest on the float 28.0%). Asset Management NPAT of
Slide 16: Consolidated financial performance
Page 16 Macquarie Securities Conference – May 2013 For personal use only Consolidated financial performance 1HFY13 1HFY12 % 1HFY13 1HFY12 % 1HFY13 1HFY12 $000 $000 Increase $000 $000 Increase $000 $000 Group Group Remuneration Remuneration Asset Asset Services Services Management Management Total To
Slide 17: Competitive environment
Page 17 Macquarie Securities Conference – May 2013 For personal use only Competitive environment Remuneration Services Overall steady, but some ongoing pressure on salary packaging fees; exacerbated by low interest environment. Increasingly, employers taking more procurement oriented approach. Emplo
Slide 18: Key opportunities for growth
Page 18 Macquarie Securities Conference – May 2013 For personal use only Key opportunities for growth Relatively small exposure to private sector. Operating lease capability (acquired April 2010) is opening up private sector opportunities for salary packaging administration and novated leases. NSW H
Slide 19: Outlook
Page 19 Macquarie Securities Conference – May 2013 For personal use only Outlook Ongoing organic profitable growth through: o New business and cross-sell from our stronger integrated value proposition, competitive cost of funds and flexible financing facilities. o Increasing participation rates with
Slide 20: Sensitivities
Page 20 Macquarie Securities Conference – May 2013 For personal use only Sensitivities Interest rates (earnings on float). Second hand car prices (remarketing earnings). New car sales (novated lease participation). Key contract tenders. Government austerity/redundancy programs. Delivery of new IT pr
Slide 21: The UK Opportunity
Page 21 Macquarie Securities Conference – May 2013 For personal use only The UK Opportunity Maxxia (UK) is a 50/50 joint venture company between Visper Asset Finance Limited (VAF) and MMS with an opportunity to move to 100% after five years. The VAF management team formerly worked for GMAC, through
Slide 22: The UK Opportunity (cont'd)
Page 22 Macquarie Securities Conference – May 2013 For personal use only The UK Opportunity (cont’d) The total committed investment for MMS over five years is UK £1.5m plus the cost of a senior MMS Executive to act as Managing Director of UK business (VAF will provide the CEO). The joint venture app
Slide 23: Appendices
Page 23 Macquarie Securities Conference – May 2013 For personal use only Appendices
Slide 24: Managing residual value risk
Page 24 Macquarie Securities Conference – May 2013 For personal use only Managing residual value risk Residual Values are set for term and kilometres by a Residual Value Committee. Proactive contract re-writes are undertaken to mark-to-market residual values where vehicle usage varies to that at inc
Slide 25: Case study public hospital
Page 25 Case study public hospital Macquarie Securities Conference – May 2013 For personal use only NIM Mgt fees Card fees Equipment finance and management Admin fee Meal entertainment Exempt – Cap $17k NIM Mgt fees Commission In life services Admin fee RV Mgt fee Commission In life services Tool of
Slide 26: Sources of revenue
Page 26 Macquarie Securities Conference – May 2013 For personal use only Sources of revenue Salary Packaging (including Novated Lease Novated Lease Operating Leases Management Services motor vehicles) Management Distribution Fees Recurring income. Portion of Recurring income. MMS can procure and ILA
Slide 27: Market opportunity
Page 27 Macquarie Securities Conference – May 2013 For personal use only Market opportunity Full FBT Rebatable FBT $17,000 Exempt $30,000 Exempt Types of Employers Government departments. Independent schools. Public hospitals. Public benevolent institutions. Private companies. Sporting clubs. Privat
Slide 28: Market opportunity (cont'd)
Page 28 Macquarie Securities Conference – May 2013 For personal use only Market opportunity (cont’d) Australian Fleet Lessors Association (AFLA) - Total Portfolio at June 2012 By Type of Facility (units/%) ILA is a tier 2 industry player. 38,414- 7.4% - Operating ILA share of novated leases as % of
Slide 29: What is salary packaging?
Page 29 Macquarie Securities Conference – May 2013 For personal use only What is salary packaging? Australia’s taxation system allows tax concessions for certain employee benefits and for certain industry sectors which makes salary packaging attractive. Eligible employees increase their disposable i
Slide 30: What is a novated lease?
Page 30 Macquarie Securities Conference – May 2013 For personal use only What is a novated lease? Enables employees to finance and operate a personal vehicle using their pre-tax income. A three way agreement between financier, employee and employer. Employee enters into a lease directly with the fin
Slide 31: Why is the novated lease market growing?
Page 31 Macquarie Securities Conference – May 2013 For personal use only Why is the novated lease market growing? Relatively young <20 year old. Around 21% of the funded vehicle market. Despite market perceptions, average income earners are becoming high users. Dec 98 – June 2012 600% (10,259 – 74,0
Slide 32: What is asset management
Page 32 Macquarie Securities Conference – May 2013 For personal use only What is asset management Financing and management services associated with motor vehicles, commercial vehicles and equipment. A financier can provide funding but this ignores the management of the asset during its life. Fleet M
Slide 33: The asset life cycle
Page 33 Macquarie Securities Conference – May 2013 For personal use only The asset life cycle In-Life Procurement Finance Disposal Services Purchase the Owned, Operating Fuel, insurance, Sale of the asset – vehicle / asset lease, finance maintenance, tyres, auction, dealers, – preferred lease, CHP,
Slide 34: Growth opportunities
Page 34 Macquarie Securities Conference – May 2013 For personal use only Growth opportunities Salary Packaging Synergies Asset Management Increase salary Cross-sell salary Grow the loan book over packages through higher packaging and novated time with operating and penetration rate and new leases to
Slide 35: Accounting for Operating Leases
Page 35 Macquarie Securities Conference – May 2013 For personal use only Accounting for Operating Leases Governed by International Financial Reporting Standards (IFRS). Rental, comprising principal and interest, management fees and all charges for services such as maintenance, tyres, automobile asso
Slide 36: Accounting for Operating Leases
Page 36 Macquarie Securities Conference – May 2013 For personal use only Accounting for Operating Leases Impairment Impairment of Residual Values tested annually. Impairment loss brought to profit and loss as part of Depreciation and Amortisation and Impairment Expenses. Impairment amount reduces th
Slide 37: Operating Lease Example
Page 37 Macquarie Securities Conference – May 2013 For personal use only Operating Lease Example Cost of Asset $25,000 PROFIT AND LOSS Residual Value $14,200 Revenue ($700*12) $8,400 Term 36 months Less: Depreciation ([$25,000 - $14,200]/36) ($3,600) Less: Interest ($1,560) Monthly Rental $700 per m
Slide 38: Year Lease – Returned in Good Condition
Page 38 Macquarie Securities Conference – May 2013 For personal use only 3 Year Lease – Returned in Good Condition Yr 1 Yr 2 Yr 3 Total Profit & Loss $ $ $ $ • Assumptions (as per presentation) plus: Revenue 8,400 8,400 8,400 25,200 Profit on Sale (@ 5%) - - 710 - • 20% equity Depreciation (3,600) (
Slide 39: Year Lease – Lower Disposal Result
Page 39 Macquarie Securities Conference – May 2013 For personal use only 3 Year Lease – Lower Disposal Result Yr 1 Yr 2 Yr 3 Total Profit & Loss $ $ $ $ • Assumptions (as per presentation) Revenue 8,400 8,400 8,400 25,200 plus: Profit on Sale (@ 1%) - - 142 142 Depreciation (3,600) (3,600) (3,600) (
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