Jefferies Financial Group Inc. · NYSE:JEF
Jefferies Financial — Investor Presentation (September 2006)
26 slides from Jefferies Financial's investor presentation, Sep 15, 2006
Slide 1: September 15, 2006
September 15, 2006 Jefferies &
Slide 2: Our Mission
Our Mission To build the leading investment bank and institutional securities firm serving growing and mid-sized companies and their investors – led by the strongest capital markets trading platform in the industry. Sales & Trading Investment Growing & Mid-sized Securities Banking Companies Research
Slide 3: Jefferies Today
Jefferies Today Six consecutive years of record revenues and earnings with Q2 2006 up 18% over Q2 2005, and first half net revenues up 32% over first half net revenues in 2005 Dominant position in target Middle Market Continued diversification of earnings as a firm overall and within virtually
Slide 4: LTM June 2006 Highlights
LTM June 2006 Highlights Record Results 2003 LTM 6/30/06 Improvement Record Gross Revenues $927 million $1.8 billion +93% Record Net Revenues $830 million $1.4 billion +67% Record EBITDA(1) $257 million $748 million +191% Record Net Earnings $84 million $189 million +125% Record EPS $0.71 $1.35 +90%
Slide 5: Demonstrated Steady Growth
Demonstrated Steady Growth Net Revenues Net Earnings Book Value ($Millions) ($Millions) ($Millions) CAGR 23% CAGR 37% CAGR 27% $1,434 $1,385 $1,287 $1,205 $189 $1,058 $1,039 $157 $131 $838 $830 $675 $84 $629 $63 2002 2003 2004 2005 LTM 2002 2003 2004 2005 LTM 2002 2003 2004 2005 6/30/06 6/30/06 6/30
Slide 6: Aligned & Motivated Management Team
Aligned & Motivated Management Team Years at Years in Name Title Jefferies the Industry Ownership%(1) Richard B. Handler(2) Chairman and CEO 16 19 9.4% Chairman, Executive Brian P. Friedman(2) 5 22 2.3% Committee Joseph A. Schenk(2) CFO 12 16 0.6% Other 6 Executive Committee Members 96 150 6.2% Tota
Slide 7: Diversified Net Revenues
Diversified Net Revenues LTM 6/30/06 $1,385mm 2003 7% $830mm 2000 38% $617mm 4% 28% 2% 15% 5% 2% 51% 4% 66% 78% SALES & TRADING INVESTMENT BANKING ASSET MANAGEMENT INTEREST & OTHER 7
Slide 8: Strong Equity Franchise
Strong Equity Franchise Top 5 best execution of all exchange-listed stock trades(1) OTC: #3 trader of combined NASDAQ and Bulletin Board stocks(2) JEF Equity Trading Revenues New Products ($Millions) ($Millions) 2003 2005 Improvement $ 500 CAGR 2% $417 Bulletin Boards $18.5 $29.5 + 59% $ 450 Rev
Slide 9: Equity Franchise Growth Strategy
Equity Franchise Growth Strategy Electronic and Algorithmic Trading Equity Products Quantitative Trading Prime Brokerage Securities Lending Equity Research: added 24 research professionals in 2006 for a total of 114 – Since 2002, expanded coverage of U.S. companies from 343 to 714, up 10
Slide 10: Investment Banking Expansion
Investment Banking Expansion Middle Market Investment Bank of the Year (1) Leading M&A advisor on Wall Street (2) Investment Banking Revenues #1 – Deals under $250 million ($Millions) $526 #5 – Deals under $1billion CAGR 46% $495 Leading high yield underwriter #1 – U.S. Single B new issues under
Slide 11: Investment Banking Growth Strategy
Investment Banking Growth Strategy New capital markets initiatives – Hired additional senior professionals – Expanded presence in technology capital markets Continued development of new industry groups – Industrials – Healthcare – Consumer Jefferies Finance LLC – Partners: Joint venture betwee
Slide 12: Investment Banking Product Mix
Investment Banking Product Mix Stronger and More Diversified Fiscal Year 2003 Fiscal Year 2005 Restructuring Restructuring 15% Equity / Convert 7% 16% M&A and Equity / Convert Advisory 21% 48% M&A and Advisory 27% Debt 42% Debt 24% 12
Slide 13: Investment Banking Industry Focus
Investment Banking Industry Focus Fiscal Year 2003 Fiscal Year 2005 Gaming - 10% Consumer Aerospace & Defense - 8% 12% Consumer General - 37% Financial Services - 6% 15% Energy 24% Healthcare - 3% Gaming - 4% Aerospace & Defense - 9% Telecom - 5% Media - 5% General - 6% NEW: Financial Services - 7%
Slide 14: Underwriting & Advisory Rankings
Underwriting & Advisory Rankings 2001 – 2005 Single B New Issues Under $150 Million 2005 Single B New Issues Under $150 Million MANAGER PROCEEDS RANK DEALS MANAGER PROCEEDS RANK DEALS Jefferies & Company, Inc. $3,026.8 1 34 Jefferies & Company, Inc. $415.5 1 5 Banc of America Securities 1,734.9 2 27
Slide 15: Branded Market Presence
Branded Market Presence Jefferies. On the move. We ae moving with enormous momentum follwing sx consecutverecord yeas, In 2005, we worked with growing and mized Companies on over 250 transactions, valued at more than $65 biion. This record performance was based on one slid principle 7 ou lent succee
Slide 16: Growing Asset Management
Growing Asset Management Building the infrastructure for a substantial asset management business – total headcount of 59 Managed Assets Asset Management Revenues ($Billions) ($Millions) $5.0 CAGR 49% $140 CAGR 83% $4.6 $103.7 $120 $4.0 $13.3 $1.1 $100 $3.0 $80 $2.0 $1.6 $60 $3.5 $40 $32.1 $90.4 $1.0
Slide 17: Strong High Yield Franchise
Strong High Yield Franchise High Yield Secondary Market Revenues Total High Yield Trading Revenues(1) ($Millions) ($Millions) CAGR 46% $125 CAGR 37% $150 $103 $124 $100 $125 $100 $75 $75 $56 $50 $40 $50 $25 $25 2003 LTM 6/30/06 2003 LTM 6/30/06 (1) Total High Yield Revenues included Jefferies Partne
Slide 18: Continued Diversification – Other Products
Continued Diversification – Other Products Convertibles Sales & Trading Revenues – Other Products – $46 million in LTM 6/30/06 revenues ($Millions) – 75 experienced professionals located in New CAGR 23% York, London, Tokyo, Zürich and Paris, who $250 $221 have relationships with over 350 accounts
Slide 19: Growth in Research Coverage
Growth in Research Coverage 28 analysts qualified for The Wall Street Journal’s “Best on the Street” annual survey for their ability to pick stocks and accurately estimate returns Covered Professionals Companies Equity Research – Companies Covered Equity 100 714 714 High Yield 14 300 597 505 412 Con
Slide 20: Small and Mid-Cap Focus in Research
Small and Mid-Cap Focus in Research Ranked #2 firm among investment banks for annualized return on analysts’ stock picks – Time Magazine 78% of equity coverage under $5 billion Equity Coverage by Market Cap Sectors Under Coverage POST-REORGANIZATION CONSUMER HEALTHCARE $0 – $500MM 25.4% SERVICES SPE
Slide 21: Investment in Human Capital
Investment in Human Capital Jefferies’ variable expense structure is responsive to all economic environments – more than 60% of total compensation expense is variable Expanded Production staff – Increased revenue generating employees from 820 to 1,547, or 89% increase Expanded Legal and Compli
Slide 22: Strong Capital Position
Strong Capital Position Nearly $2.8 billion in capital As of June 30, 2006 Long-Term Debt $ 1,263 Over $1.4 billion in cash and Series A Convertible Preferred $125 short-term investments Total Stockholder’s Equity $1,434 Investment grade since debt offering Total Capitalization $ 2,822 in 1994
Slide 23: Conservative Balance Sheet
Conservative Balance Sheet Conservative Leverage, Coverage, Risk Profile and Liquidity vs. Leading Industry Competitors Long-term Debt to Stockholder’s Equity Adjusted Total Assets(1)/Stockholder’s Equity Bear 398.4% Bear Bear 18.3x Bear Lehman 452.6% Lehman Lehman 14.2x Lehman Goldman 394.9% Goldma
Slide 24: Stock Performance Relative to Peers
Stock Performance Relative to Peers Change in Stock Price January 1, 2000 – July 31, 2006 Raymond Lehman Bear Broker Merrill A.G. Goldman Morgan Charles Knight Jefferies James Brothers Stearns Index (1) Lynch Edwards Sachs Stanley Schwab Trading 372% 251% 232% 207% 137% 75% 68% 62% (7%) (38%) (1) AM
Slide 25: A global investment bank and institutional securities firm
A global investment bank and institutional securities firm serving growing and mid-sized companies and their investors.
Slide 26: Appendix A – EBITDA Reconciliation
Appendix A – EBITDA Reconciliation EBITDA represents earnings (loss) before income taxes, interest expense, depreciation and amortization and is an approximation of cash flow from operations before tax. The Company uses EBITDA as an internal measure of performance and believes it is a useful and com
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