Perpetual Limited · ASX:PPT
Perpetual — H1 2008 Earnings Presentation
37 slides from Perpetual's earnings presentation, Feb 20, 2008
Slide 1: 2008 Half Year Results
For personal use only 2008 Half Year Results Analyst and shareholder briefing 20 February 2008
Slide 2: Agenda
For personal use only Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 1
Slide 3: Agenda
For personal use only Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 2
Slide 4: A solid first half result
For personal use only A solid first half result Dec 2007 Dec 2006 Change Six months ended $m $m % Operating profit before tax(1),(2) 114.2 96.2 19 Operating profit after tax(1),(2) 79.3 68.8 15 Net profit after tax 87.6 98.8 (11) EPS(3) 191¢ 168¢ 14 Interim dividend per share 189¢ 173¢ 9 (1) Exclude
Slide 5: Track record of continued growth
Track record of continued growth Operating profit after tax up 15% EPS(1) up 14% For personal use only $M Ce nts pe r S ha re 79.3 80 200 191 68.8 168 60 5 8.2 150 143 48.5 129 43.2 114 40 100 20 50 0 0 De c Dec D ec D ec De c Dec D ec D ec Dec Dec 03 04* 0 5* 06 07 03 04* 05* 06 07 (1) Diluted EPS
Slide 6: Increased interim dividend to cents per share
For personal use only Increased interim dividend to 189 cents per share Ordinary dividend per share (cents) 200 187 189 173 162 164 150 130 100 Ordinary Dividend 50 0 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Special Dividend (cents per share) 100 - 100 - - - 5
Slide 7: Volume growth has slowed
For personal use only Volume growth has slowed Perpetual Investments Perpetual Private Clients Perpetual Corporate Trust FUM FUA(1) FUA $B $B $B 40 39.1 36.8 37.2 9 8.6 240 8.4 35 32.8 8 2 10 .1 2 05 .7 210 30.3 7.2 1 85 .0 30 7 6.6 17 8 .6 180 6.1 6 15 2 .8 25 150 5 20 120 4 15 90 3 10 60 2 5 30 1
Slide 8: Operating profit before tax up 19%
For personal use only Operating profit before tax up 19% Dec 2007 Dec 2006 Change Six months ended $m $m % Perpetual Investments 92.5 70.4 31 Perpetual Private Clients 22.2 17.9 24 Perpetual Corporate Trust 13.6 17.2 (21) Group and Support Services (14.1) (9.3) ~ Total operating profit before tax (P
Slide 9: Perpetual Investments operating profit before tax up 31%
For personal use only Perpetual Investments operating profit before tax up 31% Dec 2007 Dec 2006 Change Six months ended $m $m % Total revenues(1) 167.0 141.1 18 Operating expenses(1) 66.0 59.1 11 Depreciation and amortisation 8.5 11.0 (23) Operating profit before tax 92.5 70.4 31 PBT margin 55% 50%
Slide 10: Perpetual Investments FUM totalled $37.2 billion at December 2007
Perpetual Investments FUM totalled $37.2 billion at 31 December 2007 For personal use only 30 Jun Net Other(1) 31 Dec Funds under management 2007 inflows 2007 $b $b $b $b Retail 9.5 (0.4) (0.1) 9.0 Intermediary (masterfund and wrap) 18.0 0.6 (0.2) 18.4 Institutional 11.6 (2.0) 0.2 9.8 All channels 3
Slide 11: Continued net inflows into higher margin intermediary channel
Continued net inflows into higher margin intermediary channel For personal use only Pleasing net flows from intermediary channel Australian $0.8 billion outflows from lower margin institutional clients equities Benefit of price increases introduced in January 2007 Small outflows in global eq
Slide 12: Australian equities revenue margins increasing
For personal use only Australian equities revenue margins increasing Price increases in January 2007 Encouraging flows into intermediary channel Institutional outflows due to: FUM – Continued industry rebalancing away from Australian equites – Institutional book continues to be closed to new a
Slide 13: Investment returns in Cash and Fixed Interest impacted by widening credit spreads
Investment returns in Cash and Fixed Interest business impacted by widening credit spreads For personal use only AAA MBS senior debt AA MBS sub-debt 12
Slide 14: Tougher operating environment for second half of 2008
For personal use only Tougher operating environment for second half of 2008 Dec 2007 Dec 2006 Change $b $b % Opening Perpetual Investments FUM 37.2 36.8 1 FUM position FUM at 31 January 2008 totalled $34.3 billion. Nearly all the reduction in FUM due to market movement in January 2008 Domestic and
Slide 15: Perpetual Private Clients operating profit before tax up 24%
Perpetual Private Clients operating profit before tax up 24% For personal use only Dec 2007 Dec 2006 Change Six months ended $m $m % Total revenues 45.9 39.6 16 Operating expenses 22.3 21.2 5 Depreciation and amortisation 1.4 0.7 100 Operating profit before tax 22.2 17.9 24 PBT margin 48% 45% ~ 14
Slide 16: Perpetual Private Clients FUA increased to $8.6b
For personal use only Perpetual Private Clients FUA increased to $8.6b (1) Funds under advice $B 8.6 8.4 8 7.2 6.6 Fiduciary 6.1 Services 6 4 Financial Advisory 2 0 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 (1) Excludes externally advised do-it-yourself (DIY) and Investor Direct Portfolio Services (IDPS) f
Slide 17: Perpetual Private Clients FUA - continued net inflows
Perpetual Private Clients FUA - continued net inflows 31 For personal use only 30 June Net December 2007 inflows Other(1) 2007 $b $b $b $b Financial Advisory - Superannuation 3.0 0.1 (0.1) 3.0 - Non-superannuation 2.2 0.1 (0.1) 2.2 5.2 0.2 (0.2) 5.2 Fiduciary Services - Philanthropic 1.2 0.1 - 1.3 -
Slide 18: Solid outlook for Perpetual Private Clients
For personal use only Solid outlook for Perpetual Private Clients Dec 2007 Dec 2006 Change $b $b % Opening Perpetual Private Clients FUA 8.6 7.2 19 FUA position Investment in sales capability showing good results Second half net flows typically stronger than first half Continued investment in ad
Slide 19: Perpetual Corporate Trust operating profit before tax down 1%
Perpetual Corporate Trust operating profit before tax down 21% For personal use only Dec 2007 Dec 2006 Change Six months ended $m $m % Total revenues 41.6 32.2 29 Operating expenses 26.4 14.1 87 Depreciation and amortisation 1.6 0.9 78 Operating profit before tax 13.6 17.2 (21) PBT Margin 33% 53% ~
Slide 20: Corporate Trust operating profit before tax by business
Corporate Trust operating profit before tax by business For personal use only Dec 2007 Dec 2006 Change Six months ended $m $m % Debt Markets (incl. Fund Services) 17.2 17.0 1 Mortgage Services (incl. integration costs) (2.2) 0.2 ~ Restructure costs (1.4) - ~ Operating profit before tax 13.6 17.2 (21
Slide 21: Perpetual Corporate Trust FUA balance continues to exceed $200b
Perpetual Corporate Trust FUA balance continues to exceed $200b For personal use only Corporate Trust Funds Under Administration $B 250 210.1 205.7 200 185.0 CMBS 178.6 1 and ABS 152.8 150 144.3 124.1 RMBS - non bank 100 50 RMBS - bank 0 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 (1) Commercia
Slide 22: Continuing to build scale through acquisition in Mortgage Services
Continuing to build scale through acquisition in Mortgage Services For personal use only Volume of transactions in Perpetual Acquired Wignalls in February 2007 and Lenders Mortgage Services National Lending Services in July 2007 No. of transactions – Part of strategy to provide mortgage 125,000 se
Slide 23: Corporate Trust business restructured in response to the current market environment
Corporate Trust business restructured in response to the current market environment For personal use only Merged our Debt Markets and Fund Services businesses Reduction in Perpetual Corporate Trust support service functions Consolidated our Mortgage Services premises in Sydney Incurred $1.4
Slide 24: Mixed outlook for Perpetual Corporate Trust
Mixed outlook for Perpetual Corporate Trust For personal use only Dec 2007 Dec 2006 Change $b $b % Perpetual Corporate Trust FUA 205.7 185.0 11 Volumes No significant new securitisation issuances forecast for second half 2008 Steady growth for mortgage services business Synergies from merging
Slide 25: Agenda
For personal use only Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 24
Slide 26: Overview
For personal use only Overview Significant changes to our operating environment Solid first half profit delivered in changing environment Concentrated our focus on efficient cost base Strong and conservative balance sheet 25
Slide 27: A solid financial result
For personal use only A solid financial result Dec 2007(1) Dec 2006 Change Six months ended $m $m % Operating revenue 261.2 221.4 18 Operating expenses 132.7 110.2 20 EBITDA 128.5 111.2 16 Depreciation and amortisation 12.7 13.6 (7) Interest 1.6 1.4 14 Operating profit before tax 114.2 96.2 19 Opera
Slide 28: Business unit profit before tax margins remain strong
Business unit profit before tax (PBT) margins remain strong For personal use only Perpetual Investments’ Perpetual Private Clients’ Perpetual Corporate Trust’s PBT margins grow PBT margins grow PBT margins reduce % % % 60 60 60 55 52 53 52 50 50 50 48 50 45 46 40 40 40 33 30 30 30 20 20 20 10 10 10
Slide 29: Reconciliation of December 2007 OPAT to statutory profit
Reconciliation of December 2007 OPAT to statutory profit For personal use only $M 125 21.1 100 87.6 79.3 (12.8) 75 50 25 0 Operating Profit on sale EMCF losses Net profit after tax profit after tax of Investments 28
Slide 30: EMCF losses mainly due to widening credit spreads
For personal use only EMCF losses mainly due to widening credit spreads AAA MBS senior debt AA MBS sub-debt Mark to market losses to 31 December 2007 total $18.3 million (before tax) and are unrealised (as disclosed to the market on 28 November 2007) Strong portfolio characteristics - high quali
Slide 31: Expense base increase driven by expansion of mortgage services business
Expense base increase driven by expansion of mortgage services business in Corporate Trust For personal use only Dec 2007(1) Dec 2006 Change Six months ended $m $m % Perpetual Investments 74.5 70.7 5 Perpetual Private Clients 23.7 21.7 9 Perpetual Corporate Trust 28.0 15.0 87 Group and Support Servi
Slide 32: A strong and conservative balance sheet
A strong and conservative balance sheet Dec 2007 Dec 2006 Change For personal use only $m $m % Cash holdings 196.7 177.5 11 Investments at market value(1) 94.1 125.5 (25) Liquid assets 290.8 303.0 (4) Net assets 346.2 310.0 12 Key financial ratios Liquid assets per share $7.01 $7.39 Gross debt(2) to
Slide 33: $2.0 billion in structured investments on balance sheet
$2.0 billion in structured investments on balance sheet at 31 December 2007 For personal use only Dec 2007 Dec 2006 Balance sheet $m $m Structured Investments - Exact Market Cash Fund Assets 1,749.0 1,247.1 Liabilities (1,749.0) (1,247.1) Total - - - Perpetual Protected Investments Assets (loans to
Slide 34: Dividend policy is to pay out 90% of 'underlying' cash earnings
Dividend policy is to pay out 90% of ‘underlying’ cash earnings to shareholders For personal use only $m Operating profit after tax 79.3 Add: equity amortisation costs 8.7 90% 2007 underlying cash earnings 88.0 payout = $79.2m ratio Number of shares (million) 41.9 Dividend per share (cents) 189 33
Slide 35: Agenda
For personal use only Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 34
Slide 36: Outlook
For personal use only Outlook Lower absolute market levels will impact second half profits Perpetual is well positioned to take advantage of market opportunities that are consistent with our strategy - we have a strong balance sheet with low gearing - our quality focused investment style typical
Slide 37: 2008 Half Year Results
For personal use only 2008 Half Year Results Analyst and shareholder briefing 20 February 2008