Smartgroup Corporation Ltd · ASX:SIQ
Smartgroup — Merger or Acquisition (July 2016)
40 slides from Smartgroup's merger presentation, Jul 25, 2016
Slide 1: Investor presentation: Trading update, acquisition of Selectus and equity raising
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only I Investor t presentation t ti Trading g update, p , acquisition of Selectus and equity raising 25 July 2016 PAGE 0
Slide 2: Important notice and disclaimer
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Important notice and disclaimer ((“Important Important Notice Notice”)) For personal use only Disclaimer The following notice and disclaimer applies to this presentation (“Presentation”) and you are therefore advised to read this carefully before
Slide 3: Important notice and disclaimer
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Important notice and disclaimer ((“Important Important Notice Notice”)) For personal use only No responsibility for any errors or omissions from this Presentation arising out of negligence or otherwise is accepted by Smartgroup or its Advisers nor
Slide 4: Important notice and disclaimer
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Important notice and disclaimer ((“Important Important Notice Notice”)) For personal use only To the maximum extent permitted by law, none of Smartgroup, any Advisers or any of their related bodies corporate, affiliates, directors, employees or agen
Slide 5: Contents
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only Contents 01 Smartgroup trading update 5 02 Acquisition of Selectus 7 03 Overview of Selectus 12 04 Outlook 19 05 Equity raising 21 A Overview of consideration 25 B Pro forma balance sheet 30 C Key risks 32 D Selling restricti
Slide 6: Smartgroup trading update
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only Smartgroup trading update 01
Slide 7: Smartgroup trading update
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Smartgroup trading update For personal use only Smartgroup H1 CY2016 audited results will be released on 25 August 2016 Smartgroup provides a trading update for the six month period ending 30 June 2016. Figures are estimated and unaudited half y
Slide 8: Acquisition of Selectus
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only Acquisition of Selectus 02
Slide 9: Acquisition of Selectus
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Acquisition of Selectus For personal use only Selectus is highly complementary to Smartgroup’s salary packaging and novated leasing business About Selectus The largest national, privately owned salary packaging and novated leasing business in Au
Slide 10: Transaction summary
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Transaction summary For personal use only Smartgroup to acquire Selectus and launch an underwritten placement to partially fund the acquisition Smartgroup to acquire 100% of Selectus for $119 million in upfront consideration ($89 million in cash
Slide 11: Total consideration
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Total consideration For personal use only Maximum consideration of ~$169 million implies an FY2017 acquisition multiple of ~6.5x including Pro y g (1) Forma Synergies Selectus FY2017 Total audited EBITDA(2) Upfront payment Conditional Shares(3) Ea
Slide 12: Financial impact
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Financial impact For personal use only Transaction expected to be approximately 6-7% accretive to CY2016 EPS on a pro forma full year NPATA basis excluding synergies and approximately 15-16% 15 16% including Pro Forma Synergies Expected impact on
Slide 13: Overview of Selectus
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only Overview of Selectus 03
Slide 14: Overview of Selectus
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Overview of Selectus For personal use only Selectus is the largest g national, privately y owned salary y packaging g g and novated leasing g business in Australia Founded in 1997 Headquartered in Melbourne with approximately 130 employees nat
Slide 15: Financial profile
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Financial profile For personal use only Selectus has a track record of revenue and EBITDA growth. Smartgroup expects Selectus to achieve high g digit single g EBITDA growth g in FY2017 under Smartgroup g p ownership p (before ( synergies) y g ) Pr
Slide 16: Rebatable expertise
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Rebatable expertise For personal use only Selectus provides another strong brand to Smartgroup’s salary packaging business and expands Smartgroup’s S t ’ salary l packaging k i and d novated t d leasing l i business b i into i t the th rebatable b
Slide 17: Customer contracts
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Customer contracts For personal use only The contract relationships of Selectus are similar to Smartgroup’s existing business. Selectus’ top four customers have all had relationships with Selectus for nine years or more and have undergone renewal
Slide 18: Smartgroup overview
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Smartgroup overview For personal use only The Selectus acquisition will expand Smartgroup’s portfolio PAGE 17
Slide 19: Acquisition history
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Acquisition history For personal use only Selectus is Smartgroup’s 11th acquisition, and fifth since the IPO 2016 PAGE 18
Slide 20: Outlook
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only Outlook 04
Slide 21: CY2016 outlook
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES CY2016 outlook For personal use only Smartgroup expects to deliver $41.2 million - $43.2 million NPATA in CY2016, including part period contributions from the Autopia p p and Selectus acquisitions q CY2016F NPATA(1) Smartgroup (including Smartequi
Slide 22: Equity raising
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only Equity raising 05
Slide 23: Overview of funding
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Overview of funding For personal use only Acquisition of Selectus to be financed via fully underwritten institutional placement and new debt facility Upfront consideration of $119 million (plus $5 million of transaction costs and $25 million of
Slide 24: Institutional placement
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Institutional placement For personal use only Key terms Fully underwritten institutional placement of approximately 7.6 million shares (“New Shares”) to raise Offer size approximately $49 million (assuming the underwritten floor price of $6.35 p
Slide 25: Indicative offer timetable
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Indicative offer timetable For personal use only Friday 22, July 2016 Record date for SPP (7.00pm Sydney time) Trading halt (before market open) Monday, 25 July 2016 Bookbuild conducted for the Placement Announcement of completion of Place
Slide 26: Overview of consideration
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only APPENDIX Overview of consideration A
Slide 27: Total consideration
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Total consideration For personal use only Total consideration of $169 million will be payable if Selectus achieves FY2017 audited EBITDA of $20 million and certain p performance metrics Selectus FY2017 EBITDA(1) Upfront cash Upfront scrip Deferred
Slide 28: Upfront payment
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Upfront payment For personal use only Upfront payment of $119 million payable on completion $89 million to be paid in cash; and $30 million (4.6 million shares) to be paid in Smartgroup shares issued to existing Selectus shareholders — Includi
Slide 29: Conditional Shares
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Conditional Shares For personal use only Any Conditional Shares will be issued in August 2017 post the release of Smartgroup’s H1 CY2017 audited results, subject to Selectus Selectus’ FY2017 audited EBITDA and certain performance metrics Up to $
Slide 30: Earnout
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Earnout For personal use only Earnout may be payable in August 2017 post the release of Smartgroup’s H1 CY2017 audited results, subject to Selectus Selectus’ FY2017 audited EBITDA and certain performance metrics Up to $25 million payable subject
Slide 31: Pro forma balance sheet
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only APPENDIX Pro forma balance sheet B
Slide 32: Pro forma balance sheet
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Pro forma balance sheet For personal use only Pro forma balance sheet as at 31 December 2015 Unaudited adj. for other Unaudited adj. for Unaudited Smartgroup acquisitions (Smartequity Selectus pro forma (31 Dec 2015) and Autopia) acquisition Smart
Slide 33: Key risks
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only APPENDIX Key risks C
Slide 34: Key business risks
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Key business risks For personal use only Risk Explanation Significant client contracts are frequently up for renewal and there can be no guarantee that Smartgroup will be successful in future tender or renewal processes, or that Smartgroup will
Slide 35: Key business risks
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Key business risks For personal use only Risk Explanation Smartgroup depends on third party financial institutions to provide funding for its employee customers which may limit, limit cease or detrimentally affect the terms of their funding Loss
Slide 36: Key business risks
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Key business risks For personal use only Risk Explanation Each of Smartgroup, Smartgroup Advantage Salary Packaging, Packaging Health-e Health e Workforce Solutions Solutions, Autopia and Selectus operate with small management teams that have be
Slide 37: Key transaction risks
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Key Transaction risks For personal use only Risk Explanation Smartgroup has undertaken and is continuing to undertake a due diligence review in respect of the Selectus acquisition acquisition. Despite taking reasonable efforts, efforts Reliance
Slide 38: Selling restrictions
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES For personal use only APPENDIX Selling restrictions D
Slide 39: Foreign selling restrictions
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Foreign selling restrictions For personal use only International Offer Restrictions This document does not constitute an offer of new ordinary shares of the Company in any jurisdiction in which it would be unlawful. In particular, this document ma
Slide 40: Foreign selling restrictions
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES Foreign selling restrictions For personal use only Singapore This document and any other materials relating to the new shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapor