Perpetual Limited · ASX:PPT
Perpetual — Investor Presentation (July 2020)
57 slides from Perpetual's investor presentation, Jul 27, 2020
Slide 1: Perpetual Limited Equity Raising: Acquisition of Barrow, Hanley, Mewhinney & Strauss LLC
PERPETUAL LIMITED EQUITY RAISING: Acquisition of Barrow, Hanley, Mewhinney & Strauss LLC July 2020 Not for distribution or release in the United States
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER This investor presentation (including the appendices) (Presentation) is dated 27 July 2020 and has been prepared by, and is the sole responsibility of, Perpetual Limited (ABN 86 000 431 827) (Perpetual). By attending an investor presentation or briefing, or accepting,
Slide 3: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER Financial information and basis of preparation All references to dollars, cents or $ in this presentation are to Australian currency, unless otherwise stated. Certain figures may be subject to rounding differences. 1H20 refers to the financial reporting period for the
Slide 4: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER Non-IFRS financial information continued Investors should also be aware that certain financial measures included in this Presentation are ‘non-IFRS financial information’ under ASIC Regulatory Guide 230: ‘Disclosing non-IFRS financial information’ and ‘non- GAAP finan
Slide 5: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER Disclaimer continued In connection with the Placement, one or more investors may elect to acquire an economic interest in the New Shares (Economic Interest), instead of subscribing for or acquiring the legal or beneficial interest in those securities. The Underwriters
Slide 6: Content and Appendices
CONTENT 1 Executive Summary 2 Overview of Barrow, Hanley, Mewhinney & Strauss 3 Strategic Rationale 4 Financial Impact 5 Offer and Funding of the Transaction APPENDICES i. Investment Performance of Barrow Hanley ii. Historical FUM Profile of Barrow Hanley iii. COVID-19 iv. Management Team v. Key Ris
Slide 7: Transformational acquisition, world-class capabilities, global footprint
Transformational acquisition Provides a platform for Perpetual to compete globally Proven brand and investment teams, well positioned for future growth World-class investment capabilities Adds multiple, high-quality global investment capabilities Provides substantial capacity for future growth Globa
Slide 8: 1. Executive Summary
1. EXECUTIVE SUMMARY Not for distribution or release in the United States 8
Slide 9: Transformational acquisition funded via $225M equity raising
TRANSFORMATIONAL ACQUISITION FUNDED VIA $225M EQUITY RAISING AND INCREASE FINANCIAL FLEXIBILITY FOR OTHER GROWTH OPPORTUNITIES Transformational Proceeds to fund Increases acquisition acquisition of Barrow Hanley financial flexibility • Perpetual to acquire a 75% stake in Barrow • Acquisition to be f
Slide 10: Transformational opportunity
TRANSFORMATIONAL OPPORTUNITY BARROW HANLEY IS A COMPELLING ACQUISITION FOR PERPETUAL SHAREHOLDERS • World-class strategies covering US, EAFE1, global and global emerging market equities and US fixed income, with significant Multiple world-class global capacity for future growth investment capabiliti
Slide 11: 2. Overview of Barrow Hanley
2. OVERVIEW OF BARROW HANLEY 11
Slide 12: About Barrow Hanley
ABOUT BARROW HANLEY A LEADING US BASED FUND MANAGER WITH A GLOBAL FOOTPRINT 21+ 43 US$44.1bn Institutional Investment FUM1 Clients Strategies Investing for 20+ Years Highly regarded Provides multiple Establishes a global specialist asset world-class investment distribution footprint management firm
Slide 13: Barrow Hanley investment strategies
BARROW HANLEY INVESTMENT STRATEGIES ATTRACTIVE AND DIVERSE RANGE OF STRATEGIES WITH CAPACITY • 14 strategies each in excess of US$500m FUM across US, global, • Barrow Hanley delivers significant FUM capacity and is highly emerging equities and fixed income asset classes1 scaleable • The acquisition
Slide 14: 3. Strategic Rationale
3. STRATEGIC RATIONALE Perpeap 14
Slide 15: Compelling strategic rationale for Perpetual
COMPELLING STRATEGIC RATIONALE FOR PERPETUAL COMBINES WORLD-CLASS INVESTMENT CAPABILITIES WITH A GLOBAL FOOTPRINT $92.3bn1 Powerful Combination Deep Combined FUM Investment Across 54 Across 13 Global Heritage4 Strategies2 Locations3 World-class investment Delivers a global Long term cultural capabil
Slide 16: How Perpetual benefits
HOW PERPETUAL BENEFITS DELIVERS DIVERSIFICATION BENEFITS AND IMPROVED GROWTH POTENTIAL • Combined business provides materially improved • Provides Perpetual with greater opportunities within diversification by asset type and geography existing relationships in Australia • Strong institutional relati
Slide 17: How Perpetual benefits: scale and global footprint
HOW PERPETUAL BENEFITS BARROW HANLEY DELIVERS SCALE AND ACCELERATES GLOBAL FOOTPRINT Over 100 investment professionals United Kingdom managing $92.3bn1 in FUM United States London2 Hong Kong2 supported by 63 distribution staff 54 investment professionals in Dallas managing over across all key region
Slide 18: Retention and incentive arrangements
RETENTION AND INCENTIVE ARRANGEMENTS DESIGNED TO REWARD LONG-TERM VALUE CREATION FOR ALL STAKEHOLDERS Boutique Model Retention Arrangements Long-term Alignment • No change to investment team or • Key members of Barrow Hanley team • Retention arrangements structured to investment process to retain 25
Slide 19: 4. Financial Impact
4. FINANCIAL IMPACT Perpeap 19
Slide 20: Trading update
TRADING UPDATE TWELVE MONTHS ENDED 30 JUNE 2020 FY20 Financial Results FY20 Divisional Results • Perpetual expects to announce a statutory net profit of • Market linked revenues in Perpetual Investments and $82.0m and an underlying profit after tax1 of $93.5m for Perpetual Private have been impacted
Slide 21: Barrow Hanley delivers scale and new capabilities
BARROW HANLEY DELIVERS SCALE AND NEW CAPABILITIES ALIGNS WITH PURSUIT OF DIVERSIFYING REVENUE Perpetual OPERATING REVENUE Combined Pro-forma 26% 27% Operating 36% Pro-forma Revenue Operating contribution1 Revenue 12 months contribution1,2,3 55% 30 June 12 months 30 June 18% 38% Investments Private C
Slide 22: Financial impact: underlying profit definition and dividend settings
FINANCIAL IMPACT CHANGE IN UNDERLYING PROFIT DEFINITION AND REVISED DIVIDEND SETTINGS • Perpetual currently pays a dividend within a range of 80-100% of NPAT on an annualised basis • Over the five years to 1H20 Perpetual averaged a dividend payout ratio of 93% returning over $0.6bn to our shareholde
Slide 23: Pro-forma profit and loss impact
FINANCIAL IMPACT PRO-FORMA PROFIT AND LOSS IMPACT Unaudited Basis of preparation Unaudited Pro-forma For the 12 months ended Adjustments Pro-forma Perpetual Barrow The pro-forma information is presented to show the impact of the Trillium and Barrow Hanley 30 June 2020 $m $m $m Hanley acquisitions ha
Slide 24: Balance sheet pro-forma impact
FINANCIAL IMPACT BALANCE SHEET PRO-FORMA IMPACT Unaudited Unaudited Basis of preparation Barrow Adjustments Pro-forma As at 30 June 2020 Perpetual Hanley $m $m $m $m Perpetual completed the acquisition of Trillium on 30 June 2020. Perpetual’s balance sheet as at 30 June 2020 includes the acquired as
Slide 25: Transformational acquisition to accelerate growth
FINANCIAL IMPACT TRANSFORMATIONAL ACQUISITION TO ACCELERATE GROWTH • This transaction is a key milestone in Perpetual’s growth strategy • Delivers scale and multiple high-quality global investment capabilities with a culturally aligned partner • Brings forward the expansion of US distribution, and w
Slide 26: 5. Offer and Funding of the Transaction
5. OFFER AND FUNDING OF THE TRANSACTION 26
Slide 27: Offer and funding
OFFER AND FUNDING FULLY FUNDED VIA COMBINATION OF CASH, DEBT AND EQUITY Sources US$m A$m1 % Description New debt 195.0 284.1 49.9% US$195m fully underwritten US$ denominated debt facilities Hedging protection in place to minimise foreign exchange risk Equity 154.4 225.03 39.5% Fully underwritten ins
Slide 28: Key details of the offer
KEY DETAILS OF THE OFFER • Fully underwritten institutional placement to raise approximately $225m (the “Placement”) • Approximately 7.4 million new fully paid ordinary shares to be issued to sophisticated and institutional investors under the Placement (the “Placement Shares”) representing approxim
Slide 29: Equity raising timetable
EQUITY RAISING TIMETABLE1 Event Date Record Date for SPP 7pm (Sydney AEST time), Friday 24 July 2020 Trading Halt Monday, 27 July 2020 Announcement of the Acquisition and Equity Raising Monday, 27 July 2020 Placement Bookbuild Monday, 27 July 2020 Announcement of the Outcome of the Placement Tuesday
Slide 30: A transformational opportunity and compelling acquisition
A TRANSFORMATIONAL OPPORTUNITY AND A COMPELLING ACQUISITION FOR PERPETUAL SHAREHOLDERS Transformational World-class investment Global distribution acquisition capabilities footprint • Provides a platform for • Adds multiple, high-quality • Brings forward the expansion Perpetual to compete global inv
Slide 31: Appendices
APPENDICES i. Investment Performance of Barrow Hanley ii. Historical FUM Profile of Barrow Hanley iii. COVID-19 iv. Management Team v. Key Risks vi. Summary of Underwriting Agreement vii. International Offer Restrictions Not for distribution or release in the United States 31
Slide 32: Investment performance of Barrow Hanley
i - INVESTMENT PERFORMANCE OF BARROW HANLEY HAS DELIVERED OUT PERFORMANCE RELATIVE TO VALUE BENCHMARKS Annualised Performance Annualised Performance Ending 30-Jun-20 (%) Over Benchmark (%) FUM 10 1 year "+/- 3 year "+/- 5 year "+/- 10 year "+/- Fund Benchmark US$ 1 Year 3 Year 5 Year Year benchmark
Slide 33: Historical FUM profile of Barrow Hanley
ii - HISTORICAL FUM PROFILE OF BARROW HANLEY 32.7 32.2 31.4 60.1 60.3 22.6 FUM BY 56.5 51.7 12.3 11.7 49.4 44.1 STRATEGY 12.3 11.5 8.4 9.0 9.7 11.4 US$bn 6.5 7.0 11.1 6.2 35.7 38.7 38.8 31.4 32.9 26.6 FY15 FY16 FY17 FY18 FY19 FY20 YTD US Equities Global Equities Fixed Income Vanguard / One-Offs 32.7
Slide 34: COVID-19
iii - COVID-19 PERPETUAL AND BARROW HANLEY Perpetual Barrow Hanley • Seamless transition with more than 95% of staff working remotely • Seamless transition to successful implementation of Business under the Crisis Management Plan Continuity Plan • Strategic imperatives remain despite current environ
Slide 35: Management team
iv - MANAGEMENT TEAM Total Experience EXPERIENCED AND STABLE TEAM Years at Barrow Hanley Cory joined Barrow Hanley in 1999 Prior to joining Barrow Hanley in 30 years and was appointed Executive 28 years 1999, Mark held various positions at Director/CEO in 2017. Prior to joining HOLT Value Associates
Slide 36: Key risks
v - KEY RISKS This section discusses some of the key risks associated with an investment in shares in Perpetual. These risks may affect the future operating and financial performance of Perpetual and the value of Perpetual shares. The risks set out below are not listed in order of importance and do
Slide 37: Key risks: acquisition risks
v - KEY RISKS ACQUISITION RISKS There is a risk that the acquisition may not complete on the current terms and expected timing, or at all, which may be exacerbated by COVID-19. Failure to complete the acquisition may be due to intervention by a regulatory body or order of a court of competent jurisd
Slide 38: Key risks: acquisition risks
v - KEY RISKS ACQUISITION RISKS Perpetual has prepared (and made assumptions in the preparation of) the financial information relating to Barrow Hanley on a stand-alone basis and the post-completion financial information relating to Perpetual (which includes Barrow Hanley) in this Presentation in re
Slide 39: Key risks: acquisition risks
v - KEY RISKS ACQUISITION RISKS To the extent that the actual results achieved by Barrow Hanley are weaker than those anticipated by Perpetual in its analysis of whether to pursue the acquisition, there are any difficulties in integrating the operations of Barrow Hanley with Perpetual, or operating
Slide 40: Key risks: acquisition risks
v - KEY RISKS ACQUISITION RISKS The Equity Purchase Agreement requires that greater than 80% of Barrow Hanley clients by revenue agree to the acquisition before the Change of acquisition can be completed. If the necessary Barrow Hanley client consents are not obtained, the acquisition will not occur
Slide 41: Key risks: acquisition risks
v - KEY RISKS ACQUISITION RISKS Barrow Hanley has significant operations in the United States as well as investments in various countries around the world. As a result of Perpetual increasing its global reach in the United States, Perpetual will be further exposed to the performance of the United St
Slide 42: Key risks: acquisition risks
v - KEY RISKS ACQUISITION RISKS As a result of acquiring Barrow Hanley, Perpetual will be exposed to risks specific to Barrow Hanley’s business. Barrow Hanley’s primary source of revenue is derived from fees for providing investment advisory and corporate trustee services, which are directly linked
Slide 43: Key risks: industry and business risks
v - KEY RISKS INDUSTRY AND BUSINESS RISKS The performance of Perpetual depends heavily upon the performance of its investments and the conditions of the equity, fixed income and Impact of COVID-19 financial markets generally across Australia and internationally where it operates. These markets are h
Slide 44: Key risks: industry and business risks
v - KEY RISKS INDUSTRY AND BUSINESS RISKS Perpetual’s revenue is significantly dependent on funds under management, funds under advice and funds under administration which are influenced by movements in equity and fixed income markets, global currencies, interest rates and broader economic condition
Slide 45: Key risks: industry and business risks
v - KEY RISKS INDUSTRY AND BUSINESS RISKS Adverse strategic decisions by Perpetual, improper implementation of strategic decisions, a lack of responsiveness to industry changes or Strategy exposure to economic, market or demographic considerations may affect Perpetual’s market position and client va
Slide 46: Key risks: industry and business risks
v - KEY RISKS INDUSTRY AND BUSINESS RISKS Key personnel are a core component of Perpetual’s business, responsible for managing client relationships and retaining corporate knowledge, promoting investment mandates and business efficiencies. Perpetual faces the risk of losses from an inability to attr
Slide 47: Key risks: industry and business risks
v - KEY RISKS INDUSTRY AND BUSINESS RISKS Perpetual relies on service providers for a number of ongoing services, which if terminated might have significant financial and operational implications for Perpetual’s business. While Perpetual seeks to manage these arrangements, from time to time, in the
Slide 48: Key risks: industry and business risks
v - KEY RISKS INDUSTRY AND BUSINESS RISKS Perpetual relies on its internal risk management control systems to manage various risks to which the business may be subject. Perpetual may suffer loss arising from inadequacies or failures of these internal processes, systems, human error or from external
Slide 49: Key risks: general investment risks
v - KEY RISKS GENERAL INVESTMENT RISKS There are general risks associated with investments in equity capital such as Perpetual shares. The trading price of Perpetual shares may fluctuate due to various factors, including movements in equity, fixed income and debt markets in Australia and internation
Slide 50: Key risks: general business risks
v - KEY RISKS GENERAL BUSINESS RISKS No assurances can be given in relation to the payment or level of franking of future dividends. Future determinations as to the payment of dividends by Perpetual will be at the discretion of the directors and will depend upon the availability of profits, the oper
Slide 51: Summary of underwriting agreement
vi - SUMMARY OF UNDERWRITING AGREEMENT Perpetual has entered into an underwriting agreement with the Goldman Sachs Australia Pty Ltd (ABN 21 006 797 897) and Merrill Lynch Equities (Australia) Limited (ABN 65 006 276 795) (Underwriters) in respect of the Placement (Underwriting Agreement) and pursua
Slide 52: Summary of underwriting agreement
vi - SUMMARY OF UNDERWRITING AGREEMENT In addition, the following termination events will depend on whether, in the bona fide opinion of the Underwriter, the event has, or is likely to have, a material adverse effect on marketing, success or settlement of the Placement, the willingness of persons to
Slide 53: International offer restrictions
vii - INTERNATIONAL OFFER RESTRICTIONS This document does not constitute an offer of new ordinary shares ("New Shares") of Perpetual in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold in
Slide 54: International offer restrictions
vii - INTERNATIONAL OFFER RESTRICTIONS Canada (British Columbia, Ontario and Quebec provinces) continued Section 138 of the Securities Act (Ontario) provides that no action shall be commenced to enforce these rights more than (a) in the case of any action for rescission, 180 days after the date of t
Slide 55: International offer restrictions
vii - INTERNATIONAL OFFER RESTRICTIONS New Zealand This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (the "FMC Act"). The New Shares are not being offered or sold in New Zealand (or allotted with a view
Slide 56: International offer restrictions
vii - INTERNATIONAL OFFER RESTRICTIONS United Arab Emirates This document does not constitute a public offer of securities in the United Arab Emirates and the New Shares may not be offered or sold, directly or indirectly, to the public in the UAE. Neither this document nor the New Shares have been a
Slide 57: Contacts
CONTACTS Emma Rumble General Manager, Corporate Affairs & Investor Relations emma.rumble@perpetual.com.au +612 9229 3998 Catherine Buckmaster Senior Manager, Investor Relations catherine.buckmaster@perpetual.com.au +612 9229 3011 About Perpetual Perpetual is an ASX-listed, diversified financial serv