Slide 1: Result Announcement for year ended 31 March 2008
For personal use only Macquarie Group Limited Result Announcement for year ended 31 March 2008 Presentation to Investors and Analysts 20 May 2008 Allan Moss, Managing Director & Chief Executive Officer Nicholas Moore, Managing Director and Chief Executive Officer designate Greg Ward, Chief Financial
Slide 2: Disclaimer
For personal use only Disclaimer This material has been prepared for professional investors. The firm preparing this report has not taken into account any customer’s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are
Slide 3: Agenda
For personal use only AGENDA 1. Introduction – Richard Sheppard 2. Highlights of result – Allan Moss 3. Result analysis – Greg Ward 4. Operational review and Outlook – Nicholas Moore 5. Appendix I – Funding analysis 6. Appendix II – Key facts on specialist funds 7. Appendix III – Specialist funds ca
Slide 4: Highlights of Result
For personal use only 2. HIGHLIGHTS OF RESULT Allan Moss – Managing Director and Chief Executive Officer Macquarie Group Limited Result Announcement for year ended 31 March 2008 20 May 2008 – Presentation to Investors and Analysts
Slide 5: Profit of $A1.8 billion
Profit of $A1.8 billion Consistent with guidance: 23% increase on prior year For personal use only $Am 2,000 $A1.80b 1,800 1,600 $A1.46b 1,400 1,200 1,000 $A916m $A812m 800 600 $A494m 400 200 0 2004 2005 2006 2007 2008 Throughout this report, periods prior to the 2005 financial year are reported und
Slide 6: Operating Income of $A8.2 billion
Operating Income of $A8.2 billion 15% increase on prior year For personal use only $Am 9,000 $A8.2b 8,000 $A7.2b 7,000 6,000 5,000 $A4.8b $A4.2b 4,000 3,000 $A2.8b 2,000 1,000 0 2004 2005 2006 2007 2008 6
Slide 7: Earnings per share of $A6.71
Earnings per share of $A6.71 13% increase on prior year For personal use only Acps 700 671cps 600 592cps 500 400cps 400 370cps 300 233cps 200 100 0 2004 2005 2006 2007 2008 Basic EPS. 7
Slide 8: Dividend per share of $A3.45
Dividend per share of $A3.45 10% increase on prior year For personal use only 52% payout ratio on total dividends for year ended 31 March 2008, 100% franked Acps 400 Special dividend 345cps 350 315cps 300 250 215cps 201cps 200 150 122cps 100 50 0 2004 2005 2006 2007 2008 8
Slide 9: Assets under management of $A232 billion
Assets under management of $A232 billion 18% increase on prior year For personal use only $Ab 250 FSG/FMG Wholesale $A232b FSG/FMG Retail Other Specialist 200 Real estate $A197b Infrastructure 150 $A140b 100 $A97b $A63b 50 0 2004 2005 2006 2007 2008 Note: Sale of Macquarie-IMM Investment Management
Slide 10: International income of $A4.3 billion
International income of $A4.3 billion 14% increase on prior year, Asia-Pacific up 71% For personal use only 57% of operating income1 $US/$A exchange rate strengthened from $0.60 at 1 April 2003 to $0.91 at 31 March 2008 $Am 5,000 4,500 $A4.3b 4,000 $A3.8b 3,500 3,000 2,500 $A2.0b 2,000 1,500 $A1
Slide 11: Capital growth
Capital growth Return on equity: 23.7% For personal use only Consistently grown capital ahead of business requirements to allow for future growth $Ab $12 New Capital* Macquarie Income Preferred Securities $10 $A10.0b Macquarie Income Securities Ordinary shareholders equity $8 $A7.5b $6 $A5.3b $A4.
Slide 12: Very well positioned
Very well positioned For personal use only Macquarie remains — Very profitable — Well capitalised — Well funded No unusual trading exposures No unusual concerns with credit quality Reflects Macquarie’s strong commitment to risk management Despite market conditions, global business platform
Slide 13: Result Analysis
For personal use only 3. RESULT ANALYSIS Greg Ward – Chief Financial Officer Macquarie Group Limited Result Announcement for year ended 31 March 2008 20 May 2008 – Presentation to Investors and Analysts
Slide 14: Key drivers of year
Key drivers of year For personal use only Strong performance from equities related businesses in Asia, Australia and Europe, especially in 1H08 Substantial investment banking deal flow – value of transactions $A200b Record volumes in foreign exchange and commodity related businesses Record p
Slide 15: Comments on the second half
Comments on the second half (6 months to 31 March 2008) For personal use only In November 2007 we said: — “Expect 2H08 result to be at least in line with 2H07 result of $A733m, but down on very strong first half because: — Equity market conditions may not be as favourable — 1H08 benefited from ass
Slide 16: Segment analysis
Segment analysis Net profit contribution by operating group For personal use only Early adoption of new segment accounting standard: AASB8 Segments presented in line with reporting to management: net profit by operating group1 2008 2007 Contribution Movement Key drivers $Am $Am (%) Strong growth
Slide 17: Operating income
Operating income 15% increase on prior year to $A8.2b For personal use only $Ab 9.0 Asset and equity investment realisations and other income 8.0 Interest income 7.0 Trading income 6.0 Fee and commission income 5.0 4.0 3.0 2.0 1.0 0.0 2004 2005 2006 2007 2008 17
Slide 18: Diversity of operating income
Diversity of operating income* For personal use only Dividends & distributions, 1.0% Base funds management fees, specialist funds, 7.2% Share of net profits of associates, 1.9% Base funds management fees, other funds, 3.8% Net interest income, 8.1% Interest rate products, 1.2% Performance fees, 4.4%
Slide 19: Fee and commission income
Fee and commission income 31% increase on prior year to $A4.6b For personal use only $Am Approximately 20% of total Group 1600 Mar 2006 Mar 2007 Mar 2008 operating income from specialist funds or managed asset agreements 1400 — Approx 10.8% of operating income derived from base and performance fee
Slide 20: Funds management income
Funds management income AUM up 18% on prior year to $A232b Base Fees up 22% on prior year to $A958m For personal use only AUM ($Ab) AUM & Base fees Base Fees ($Am) $Am Performance fees 260 1200 800 Infrastructure 240 Infrastructure Real estate 700 220 1000 Real estate Other specialist 200 600 FSG/FM
Slide 21: Record specialist fund raisings
Record specialist fund raisings For personal use only $A22.4b raised over the 12 months to 31 March 2008 75% from international investors and 85% into unlisted funds or syndicates $Ab 25 20 Fund Raising ($Ab) Unlisted infrastructure 7.74 15 Listed Infrastructure 2.95 Unlisted Real Estate 5.39 Li
Slide 22: High equity broking volatility and volumes
High equity broking volatility and volumes For personal use only Globally there has been an increase in volumes traded ⎯ Average volumes in markets in which we operate significantly up on prior year 2H08 characterised by increased volatility Market Turnover Index 200 180 Asian market turnover *
Slide 23: Net trading income
Net trading income 49% increase on prior year to $A1.9b For personal use only $Am Mar 08 Mar 07 1200 $Am $Am Net Trading Income (as reported) 1,835 1,047 1000 Revaluation of derivatives (28) 61 instruments1 800 Accounting for swaps2 116 184 600 Adjusted Net Trading Income 1,923 1,292 +49% 400 High
Slide 24: Net interest income
Net interest income 29% increase on prior year to $A701m For personal use only Income $Am Margin % Mar 08 Mar 07 700 3.00 $Am $Am Net Interest Income (as reported) 817 728 600 2.50 Accounting for swaps* (116) (184) 500 2.00 Adjusted Net Interest Income* 701 544 +29% 400 1.50 Average loan volumes (
Slide 25: Income from asset & equity investment realisations and other transactions
Income from asset & equity investment realisations and other transactions For personal use only Mar 08 Mar 07 Mar 06 $Am $Am $Am Asset & equity investment realisations Profit on disposal of assets and equity investments 1,040 1,098 306 Gains on Goodman Group - 302 - Other Dividends, distributions an
Slide 26: Equity investments of $A6.3b
Equity investments1 of $A6.3b Alignment of interests with investors For personal use only Substantial investments held in Macquarie-managed funds and listed fund managers: $A3.6b at 31 Mar 2008 — Listed funds and listed fund managers: $A3.0b – net unrealised gains of approx $A281m2 — Unlisted fund
Slide 27: Positions in listed specialist funds and listed fund managers
Positions in listed specialist funds and listed fund managers For personal use only Unrealised Market value @ gain/(loss) @ Book value @ 31 March 2008 16 May 2008 16 May 2008 $Am Macquarie Airports (MAp) 930 - 930 1,106 176 Macquarie Capital Alliance Group (MCQ) 141 - 141 95 (46) Macquarie Communica
Slide 28: Held for Sale Assets and Investments
Held for Sale Assets and Investments1 Over $A1b sold since March 2007 For personal use only $Am 2,500 $A752m of Held for Sale assets at 31 March 2008 include: Ô New World Gaming Partners (Gateway On balance sheet Casinos) 2,000 Acquisitions Disposals Ô Express Offshore Transport Ô Taurus Aerospace
Slide 29: Operating expenses and headcount
Operating expenses and headcount For personal use only Expense Income (LHS) to income Expense/income ratio 73.3% – broadly in $Ab Expenses (LHS) line with prior year ratio (% ) 9.0 Expense to income ratio (RHS) 80 Headcount up 31% on prior year to 8.0 79 approximately 13,000 staff, including: ⎯
Slide 30: Taxation
Taxation For personal use only Mar 08 Mar 07 % % Corporate tax rate 30.0 30.0 Rate differential on offshore income (14.3) (10.6) Non-deductible distribution paid/provided on MIS 0.5 0.5 Non-deductible options expense 1.7 1.4 Other (2.9) (0.8) Effective tax rate 15.0 20.5 Increase in offshore activ
Slide 31: Funding and liquidity
Funding and liquidity For personal use only Well funded Liquid assets of $A18.3b for the Group, increased to a level which is approximately 3 times the level at 31 March 2007 Since August 2007, significant term funding of $A17b has been raised and deposits have increased 30% to $A13.2b from $A
Slide 32: Funding structure
Funding structure For personal use only MGL and MBL are the Group’s two primary external funding vehicles which have separate and distinct funding, capital and liquidity management arrangements MGL provides funding predominantly to the Non-Banking Group MBL provides funding to the Banking Grou
Slide 33: Group funding requirements
Group funding requirements For personal use only Mar 08 $Ab Total assets per Statutory Balance Sheet 167.2 Less accounting gross-ups and non-recourse funded assets: Self funded trading assets (28.9) Securitised assets and non-recourse warehouses (25.2) Derivative revaluation gross-ups (18.6) Life in
Slide 34: Funding for the Group
Funding for the Group For personal use only Diversity of funding sources ($Ab) Balance sheet composition $Ab Secured Undrawn Senior funding, $A8.2 Funding sources Bonds, $A8.1 credit facility, Issued paper (NCDs, commercial paper and other issued paper) 25.8 $A4.1 Drawn Senior credit facility, Equit
Slide 35: Recent funding experience
Recent funding experience For personal use only Current approx. increased spread Funding compared to pre-Aug source Category Initiative 2007 levels (bps) Deposits Deposits Up $A3.0b (30%) since Aug 2007 to $A13.2b at Mar 2008 0-20 Issued paper Domestic Negotiable Short term issues up $A2.4b (32%
Slide 36: Funding programmes
Funding programmes For personal use only Both MGL and MBL have debt programmes in place to access the key capital markets in Australia, Europe, Asia and the US as opportunities arise — MGL Debt Instrument Programme (Australia, Europe & Asia) — MGL Rule 144A/Medium Term Note Programme (US) — MBL De
Slide 37: Regulatory capital position
Regulatory capital position For personal use only Macquarie Group Limited – Regulatory Capital Position (31 March 2008) Banking Group Minimum Capital Requirement Non Banking Group Buffer for volatility, growth Buffer for Volatility and strategic flexibility Growth and Strategic Flexibility Regulator
Slide 38: Operational Review and Outlook
For personal use only 4.OPERATIONAL REVIEW AND OUTLOOK Nicholas Moore – Managing Director and Chief Executive Officer designate Macquarie Group Limited Result Announcement for year ended 31 March 2008 20 May 2008 – Presentation to Investors and Analysts
Slide 39: Strong broad-based growth
Strong broad-based growth For personal use only Group growth driven by: — Previous business investment — Diversification by product and geography — Continued strong demand for Macquarie products Good contribution from most operating groups. Exceptions: — Real Estate Group contribution impacted b
Slide 40: No unusual trading exposures
No unusual trading exposures Our robust risk management has proven effective in this environment For personal use only Main business focus is making returns by providing services to clients rather than by principal trading No problem trading exposures No material problem credit exposures No
Slide 41: Geographically diverse sources of income
Geographically diverse sources of income For personal use only Note: Income in each region excludes earnings on capital and other corporate items Australia Asia-Pacific 5 year CAGR to 31 Mar 08: 20% $Am 5 year CAGR to 31 Mar 08: 70% $Am $A3.3b 2500 $A2b 3,500 +7% on prior yr +71% on prior yr 3,0
Slide 42: Macquarie Capital
Macquarie Capital 63% of Macquarie profit1, 13% up on prior year For personal use only Good result despite mixed market conditions All divisions up on last year Strong contribution from Asia Pacific International operations contributed 67% of net income Continued to invest in staff with mo
Slide 43: Macquarie Capital
Macquarie Capital 63% of Macquarie profit1, 13% up on prior year For personal use only Macquarie Capital Advisers – 44% of Macquarie profit1 — Advised on over 300 transactions worth Income by industry group around $A200b, approximately 25% above record FY07 volumes — Diverse income base across geo
Slide 44: Macquarie Capital
Macquarie Capital 63% of Macquarie profit1, 13% up on prior year For personal use only Macquarie Capital Advisers (cont…) — Managed funds have generated a compound annual return of 16%2 for investors since inception — $A11b in new capital raisings by funds and consortia during FY083 — Assets under
Slide 45: Macquarie Capital
Macquarie Capital 63% of Macquarie profit1, 13% up on prior year For personal use only Macquarie Capital Securities (institutional cash equities) – 12% of Macquarie profit1 — Excellent overall result: 36% up on prior year, driven by increased volumes — Asia: 48% up on prior year - now contributes
Slide 46: Macquarie Capital
Macquarie Capital 63% of Macquarie profit1, 13% up on prior year For personal use only Macquarie Capital Finance – 2% of Macquarie profit1 — Result up 3% on pcp — Total assets have increased 34% to $A7.3b from $A5.4b at 31 March 2007 (net funded assets of $A3.7b) — Acquired CIT Systems Leasing — A
Slide 47: Equity Markets Group
Equity Markets Group 16% of Macquarie profit1, 76% up on prior year For personal use only 2H08 well down on 1H08 due to reduced transaction volumes resulting Income by region from the flow through of credit market disruption to equity markets and some seasonal factors Equity Products Division —
Slide 48: Equity Markets Group
Equity Markets Group 16% of Macquarie profit1, 76% up on prior year For personal use only Current operating environment: Market conditions are generally more challenging than the highly favourable conditions in 1H08 Volumes are down for listed products in Australia and Asia Outlook: Expect mar
Slide 49: Treasury & Commodities Group
Treasury & Commodities Group 14% of Macquarie profit1, slightly up on prior year For personal use only Metals & Energy Capital, Agriculture & Investor Products and Foreign Income by region Exchange the leading contributors: — Metals & Energy Capital – well down on strong prior year which included
Slide 50: Treasury & Commodities Group
Treasury & Commodities Group 14% of Macquarie profit1, slightly up on prior year For personal use only Current operating environment: Benefiting from increased volatility across most markets Satisfactory volumes across the business, particularly strong volumes in commodities and foreign exchange
Slide 51: Real Estate Group
Real Estate Group (2)% of Macquarie profit1, overall loss for year For personal use only Net loss of $A81m for the year due to $A293m write-down on holdings Income by region in listed real estate investments Significant contribution from sale of Macquarie ProLogis Trust, disposal of Japanese res
Slide 52: Real Estate Group
Real Estate Group (2)% of Macquarie profit1, overall loss for year For personal use only Current operating environment: Sharp decline in almost all global listed real estate markets - many REITs priced well below reported NAVs Asset price reductions likely in most markets Investors waiting for
Slide 53: Financial Services Group
Financial Services Group 4% of Macquarie profit1, 33% up on prior year For personal use only Retail broking income significantly up on prior year despite lower volumes in 2H08 Income by region Total assets under Advice/Administration/Management up 15% to $A80.9b from $A70.5b at 31 March 2007 — C
Slide 54: Financial Services Group
Financial Services Group 4% of Macquarie profit1, 33% up on prior year For personal use only Current operating environment: Retail broking volumes have declined from very high levels reached during 2007 Challenging markets, investors expected to remain cautious about equities in the short-term
Slide 55: Banking and Securitisation Group
Banking and Securitisation Group 1% of Macquarie profit1, substantially down on prior year For personal use only Substantially down due to negative contribution from mortgages Income by region business Increased contributions from Relationship Banking and Investment Lending Mortgage originatio
Slide 56: Funds Management Group
Funds Management Group 4% of Macquarie profit1, very substantially up on prior year For personal use only Very substantially up on prior year due to: Income by region — Sale of Macquarie-IMM Investment Management joint venture in Korea (slightly down on prior year excluding IMM sale) — Good perfor
Slide 57: Global market conditions
Global market conditions For personal use only Credit markets — Investor sentiment continues to improve albeit with caution — More normal access to short term funding markets returning — International credit market activity increasing but still well below historical levels and limited securitisati
Slide 58: Global market conditions
Global market conditions For personal use only Investment banking — Challenging market for global investment banks — Lower ECM volumes globally although reasonable volumes in Asian markets — M&A activity has fallen globally although strong outward investment from Asia and continued M&A activity in
Slide 59: Outlook
Outlook For personal use only Market conditions make short-term forecasting more difficult than usual The current state of financial markets means that it will be challenging to repeat last year’s record performance, but this may be achievable However, over the medium term we continue to be we
Slide 60: Appendix I Funding Analysis
For personal use only 5. APPENDIX I Funding Analysis Macquarie Group Limited Result Announcement for year ended 31 March 2008 20 May 2008 – Presentation to Investors and Analysts
Slide 61: Funding for the Banking Group
Funding for the Banking Group For personal use only Balance sheet composition $Ab Diversity of funding sources ($Ab) Secured Funding sources funding, $A7.1 Subordinated Bonds, $A8.1 Issued paper (NCDs, commercial paper and other issued paper) 25.8 debt, $A2.3 Secured funding 7.1 Other issued Equity,
Slide 62: Funding for the Non-Banking Group
Funding for the Non-Banking Group For personal use only Balance sheet composition $Ab Diversity of funding sources ($Ab) Funding sources Deposits, Other bank $A0.2 loans, $A0.3 Secured funding 1.1 Undrawn senior credit Equity, $A3.6 Other bank loans 0.3 facility, $A4.1 Secured Deposits 0.2 funding,
Slide 63: Appendix II Key facts on specialist funds
For personal use only 6. APPENDIX II Key facts on specialist funds Macquarie Group Limited Result Announcement for year ended 31 March 2008 20 May 2008 – Presentation to Investors and Analysts
Slide 64: Specialist funds – key facts
Specialist funds – key facts For personal use only Track record — Macquarie Capital Funds have generated a compound annual return of 16%1 for investors since inception — Macquarie’s listed Real Estate Investment Trusts (REITs) have generated a compound annual return of over 102% for investors sinc
Slide 65: Specialist funds – key facts
Specialist funds – key facts For personal use only Gearing — Macquarie Capital Funds: — Predominantly essential or privileged assets with highly predictable, long term revenue streams — Appropriately geared: 56%1 average gearing across assets managed by funds — Macquarie funds often invest alongsi
Slide 66: Specialist funds – key facts
Specialist funds – key facts For personal use only Robust governance framework — Each listed vehicle has its own Board with a majority of directors independent of Macquarie — Each listed vehicle has its own Managing Director and/or Chief Executive Officer — Staff dedicated to each fund serving int
Slide 67: Appendix III Specialist funds case study
For personal use only 7. APPENDIX III Specialist funds case study Macquarie Group Limited Result Announcement for year ended 31 March 2008 20 May 2008 – Presentation to Investors and Analysts
Slide 68: Managing important assets across the globe
Managing important assets across the globe Strong investor support: $A70b raised over past 4 years For personal use only Macquarie Capital Funds: over 110 assets; Real Estate Funds: over 700 assets UK Poland Canada USA Aquarion Japan South Korea M6 Toll Deep Sea Container Edmonton Ring Road
Slide 69: Delivering for communities: Turning Thames Water around
Delivering for communities Turning Thames Water around For personal use only Macquarie’s operational expertise adding value Acquired December 2006 by a consortium led by Macquarie’s unlisted European infrastructure funds 20061 20082 Improvement since Improved Supply acquisition Capital expenditure
Slide 70: Delivering for communities: Turning Thames Water around
Delivering for communities Turning Thames Water around For personal use only "I am glad that the company has met its leakage target and feel that this is representative of the positive changes achieved under the new management." Ken Livingstone, former Mayor of London, in answer to a question in the
Slide 71: Glossary
For personal use only 8. GLOSSARY Macquarie Group Limited Result Announcement for year ended 31 March 2008 20 May 2008 – Presentation to Investors and Analysts
Slide 72: Glossary
Glossary For personal use only $C Canadian dollar $US/USD US Dollar 1H First half 1H07 Half year ended 30 September 2006 1H08 Half year ended 30 September 2007 2H Second half 2H07 Half year ended 31 March 2007 2H08 Half year ended 31 March 2008 ADCB Abu Dhabi Commercial Bank AGAAP Australian General
Slide 73: Glossary
Glossary For personal use only ECM Equity Capital Markets ECP European Commercial Paper EMG Equity Markets Group EPS Earnings Per Share FIG Financial Institutions Group FIRB Foreign Investment Review Board FMG Funds Management Group FSG Financial Services Group FX Foreign Exchange FY Full Year HFS H
Slide 74: Glossary
Glossary For personal use only MCW Macquarie CountryWide Trust MCQ Macquarie Capital Alliance Group MDIF Macquarie Diversified Infrastructure Fund MDT Macquarie DDR Trust MEIF Macquarie European Infrastructure Fund MGL Macquarie Group Limited MIC Macquarie Infrastructure Company Trust MIG Macquarie
Slide 75: Glossary
Glossary For personal use only p.a. per annum pcp prior corresponding period REIT Real Estate Investment Trust RHS Right hand side SGX Singapore Exchange SIV Structured Investment Vehicle TMET Telecommunications, media, entertainment and technology TSE Tokyo Stock Exchange UK United Kingdom US Unite