Mcmillan Shakespeare Limited · ASX:MMS
Mcmillan Shakespeare — CLSA Presentation (September 2010)
27 slides from Mcmillan Shakespeare's conference presentation, Sep 30, 2010
Slide 1: CLSA Presentation
For personal use only Presentation by McMillan Shakespeare Limited CLSA Presentation September 2010
Slide 2: Company overview
Company overview For personal use only Key points MMS is a unique provider of workplace benefits in Australia. Fleet management business of Interleasing Australia acquired in April 2010. The combined business provides salary packaging administration and integrated fleet management services. It is th
Slide 3: Financial performance
Financial performance For personal use only FY05 FY06 FY07 FY08 FY09 FY10 $’000 $’000 $’000 $’000 $’000 $’000 Total revenue 35,838 48,721 54,536 66,624 77,259 131,021 Normalised pre tax profit from continuing operations 7,915 15,013 19,079 24,919 28,912 39,904 Normalised NPAT 5,054 11,305 13,237 17,
Slide 4: Historical normalised NPAT
Historical normalised NPAT(1) For personal use only Profit 17.1 recognised on 40 ILA business combination Normalised NPAT 5-year CAGR of 39.9% 30 $m 27.9 20 20.5 17.4 13.2 10 11.3 5.2 0 FY05 FY06 FY07 FY08 FY09 FY10 NPAT (continuing operations) Acquisition Gain Note 1: Normalised numbers exclude the
Slide 5: Earnings and dividends per share
Earnings and dividends per share For personal use only Normalised earnings per share (EPS) (1) Total dividends per share 50.0 30 EPS 5-year CAGR of 39.0% 45.0 40.0 25 35.0 20 30.0 cents cents 25.0 15 20.0 15.0 10 10.0 5 5.0 0.0 0 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY04 FY 05 FY 06 FY 07 FY 08
Slide 6: What is salary packaging?
What is salary packaging? For personal use only 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 income by using pre-tax salary to pay for goods or s
Slide 7: What is fleet management?
What is fleet management? For personal use only MMS finances and manages vehicle fleets for its large corporate customers and charges a monthly “rental” fee. “Management” includes: - maintenance; - fuel; - tyres; - traffic fines; - registration; - insurance; and - accident management. Fleet manageme
Slide 8: Service driven solutions – solving complex workplace problems
Service driven solutions – solving complex workplace problems for employers and employees For personal use only Client Challenges MMS Solutions No Limited tax ownership reporting Relationships, experience and expertise Employers want to attract capability layer and retain staff through benefits but
Slide 9: Revenue sources
Revenue sources For personal use only Salary packaging administration fees: - annuity income stream; paid directly from employees’ salary. Facilitation and procurement fees for assisting with novated lease settlements. Net interest margin on financed vehicles. Fees for managing customer vehicle flee
Slide 10: What is MMS's comparative/competitive advantage?
What is MMS’s comparative/competitive advantage? For personal use only A unique market position: the only integrated provider of salary packaging and “company car” solutions. Industry leading service levels. Scale in BPO business/dominant player (MMS is over twice the size of its nearest competitor
Slide 11: Client service levels and productivity
Client service levels and productivity For personal use only Productivity Index Customer Satisfaction Index MMS Productivity Index (July 08 = 100) MMS Customer Satisfaction Index [Rolling 3 month Non-Interest Revenue / FTE] December 2008 = 100 250 135 130 200 125 120 150 115 100 110 105 50 100 95 0
Slide 12: Our unique market position
Our unique market position For personal use only Core Skills Core Skills Operating Lessors/ Proactive sales culture Managing vehicle value Salary Packagers Fleet Managers Retail sales and marketing chain: procurement, Budgeting/ BPO processing maintenance and disposals Tax knowledge base Novated (in
Slide 13: Interleasing Australia (ILA)
Interleasing Australia (ILA) For personal use only Key Points Acquired in April 2010 for $208m, at a discount to net assets. Major passenger car and light commercial vehicle owner and fleet manager. Multi-brand fleet with exclusive rights to Holden Leasing brand. Provides operating and managed lease
Slide 14: Growth opportunities
Growth opportunities For personal use only Salary Packaging Synergies Asset Management Increase salary packages Cross-sell salary Grow the loan book over through higher packaging and novated time with operating and penetration rate and new leases to ILA client base. managed leases. client wins. Prov
Slide 15: How will MMS continue to grow?
How will MMS continue to grow? For personal use only Market grows at 3-8%pa depending on economic conditions. See Appendices II and III for market overviews. Only around 12-14% of MMS target salary packaging market is outsourced. Improving employee participation rates with existing customers. Unique
Slide 16: Key Sensitivities
Key Sensitivities For personal use only New car sales market. Second hand car values. Interest rates. Interest rate margin on operating leases. Key contract tender. Economic conditions generally. P 15 September2010
Slide 17: Appendices
Appendices For personal use only I Sources of Revenue II Market opportunity III Market opportunity (cont’d) IV Credit Risk V Interest Rate Risk VI Residual Value Risk VII Regulatory themes post Henry Inquiry VIII Gearing IX Debt facilities X Share price chart P 16 September2010
Slide 18: Sources of revenue
Sources of revenue For personal use only Salary Packaging Novated Lease Novated Lease Operating Leases Management Services (including motor Management Distribution Fees vehicles) Recurring income. Portion Recurring Income. MMS can procure and ILA rents passenger and ILA receives of employee’s pre-ta
Slide 19: Market opportunity
Market opportunity For personal use only 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. Private not-for-profit hospitals. Charities. Public compa
Slide 20: Market opportunity (cont'd)
Market opportunity (cont’d) For personal use only Australian Fleet Lessors Association (AFLA) - Total Portfolio at July 2010 By Type of Facility (units/%) ILA is a tier 2 industry player. 40,867 - 8% - Operating ILA share of novated leases as Leases - Funding % of total fleet significantly less only
Slide 21: Credit Risk
Credit Risk For personal use only The risk that customers can not pay their lease installments or do not pay on time, resulting in losses on collecting monies owed All new business proposals reviewed prior to credit advanced, using robust rules. Annual reviews of all credit line facilities undertake
Slide 22: Interest Rate Risk
Interest Rate Risk For personal use only The risk that as interest rates move up or down, the net profit of the business moves likewise Leases are for fixed terms at fixed interest rates. Revenue side locked in. McMillan matches to the profile of how leases amortise, the funding term of what we borr
Slide 23: Residual Value Risk
Residual Value Risk For personal use only The risk that the estimated future value used to calculate the monthly rentals higher than the actual sales proceeds received on disposal of the asset Approach used – highly professional and disciplined approach to pricing. People assessing and monitoring ar
Slide 24: Regulatory themes post Henry Inquiry
Regulatory themes post Henry Inquiry For personal use only Government has ruled out changes to Fringe Benefits Tax exemptions for Not- for-Profit’s “at any time”. Henry has recommended flat rate (20%) for FBT on motor vehicles. No government response, however, no material impact envisaged. Henry rec
Slide 25: Gearing
Gearing For personal use only Balance at 30th June 2010 $000 Net debt 125,970 Book value of equity 89,417 Gearing - net debt / (net debt + equity) 58% Interest times cover (4Q FY10) 5.80 ** As at 30th June 2010 the group is well within its banking covenants. Source: Bloomberg P 24 September2010
Slide 26: Debt facilities
Debt facilities For personal use only Existing bank facilities include: Facility A - $30.0 million debt funding provided to MMS (Termination date 31 March 2013) - amortises $4m every 6 months commencing December, 2010. Facility B - $5.0 million working capital facility provided to MMS (Termination d
Slide 27: Share price chart
Share price chart For personal use only Source: Bloomberg P 26 September2010
McMillan Shakespeare — CLSA Presentation (September 2010) on 6ix