Perpetual Limited · ASX:PPT
Perpetual — H1 2007 Earnings Presentation
35 slides from Perpetual's earnings presentation, Feb 21, 2007
Slide 1: 2007 Half Year Results
2007 Half Year Results Analyst and Shareholder Briefing 21 February 2007
Slide 2: Agenda
Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 1
Slide 3: Agenda
Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 2
Slide 4: A solid first half result
A solid first half result Dec 2006 Dec 2005(3) Change Six months ended $m $m % Operating profit before tax(1) 96.2 85.3 13 Operating profit after tax(1) 68.8 58.2 18 Net profit after tax 98.8 73.5 34 EPS(2) 168¢ 143¢ 17 Interim dividend per share 173¢ 162¢ 7 (1) Operating profit excludes significant
Slide 5: Track record of continued growth
Track record of continued growth Operating profit after tax up 18% EPS up 17% $M Cents per Share 80 200 68.8 1 68 60 58.2 150 1 43 48.5 1 29 43.2 1 14 40 35.2 100 93 20 50 0 0 Dec Dec Dec Dec Dec D ec Dec D ec D ec D ec 02 03 04 * 05 * 06 02 03 04 * 05 * 06 * Amounts shown in December 2004 and Decem
Slide 6: Increase in interim dividend to 173 cents per share
Increase in interim dividend to 173 cents per share Ordinary dividend per share (cents) 200 173 162 164 150 130 130 100 Ordinary Dividend 50 0 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Special Dividend - 100 - 100 - (cents per share) 5
Slide 7: Good volume growth in all businesses
Good volume growth in all businesses Perpetual Investments Perpetual Private Clients Corporate Trust FUM up 12% from Jun 06 FUA(1) up 9% from Jun 06 FUA up 4% from Jun 06 $B 36.8 $B $B 35 7.2 1 78.6 1 85 .0 32.8 7 180 6.6 30.3 30 6.1 15 2.8 6 5.8 26.0 26.7 5.6 150 144.3 25 124.1 5 120 20 4 90 15 3 6
Slide 8: Operating profit before tax up 13%
Operating profit before tax up 13% Dec 2006 Dec 2005 Change Six months ended $m $m % Perpetual Investments 70.4 58.0 21 Perpetual Private Clients 17.9 16.0 12 Perpetual Corporate Trust 17.2 15.6 10 Group and support services (9.3) (4.3) ~ Total operating profit before tax (PBT) 96.2 85.3 13 PBT marg
Slide 9: Perpetual Investments operating profit before tax up 21%
Perpetual Investments operating profit before tax up 21% Dec 2006 Dec 2005(1) Change Six months ended $m $m % Total revenues(2) 141.1 122.5 15 Operating expenses(2) 59.7 53.3 12 Depreciation and amortisation 11.0 11.2 (2) Operating profit before tax 70.4 58.0 21 PBT margin 50% 47% ~ (1) Prior year a
Slide 10: Perpetual Investments: FUM up 12% or $4 billion
Perpetual Investments: FUM up 12% or $4 billion 30 Jun Net 31 Dec Other(1) Funds Under Management 2006 inflows 2006 $b $b $b $b Retail 8.4 (0.2) 0.8 9.0 Intermediary (masterfund and wrap) 15.4 0.6 1.7 17.7 Institutional 9.0 0.3 0.8 10.1 All channels 32.8 0.7 3.3 36.8 Australian equities 22.0 (0.1) 2
Slide 11: Solid inflows into new asset classes and intermediary channel
Solid inflows into new asset classes and intermediary channel Australian Healthy inflows from intermediated channel equities Outflows from lower margin institutional clients Cash and fixed Majority of flows coming from the institutional channel interest Now represents 23% of FUM Flat FUM in Global E
Slide 12: Improved global equities investment performance will drive future FUM growth
Improved global equities investment performance will drive future FUM growth Significantly improved investment performance over past 12 – 18 months Encouraging signs Good performance relative to main competitors over past 12 months Excellent long term prospects for this asset class Outlook Continue
Slide 13: Good starting position for second half of 2007
Good starting position for second half of 2007 Dec 2006 Dec 2005 Change $b $b % Strong FUM Perpetual Investments FUM 36.8 30.3 21 position Fee increases came into effect in January 2007 Solid foundations Outlook Positive results emerging from new initiatives Good future growth prospects subject to m
Slide 14: Perpetual Private Clients operating profit before tax up 12%
Perpetual Private Clients operating profit before tax up 12% Dec 2006 Dec 2005(1) Change Six months ended $m $m % Total revenues 39.6 35.2 13 Operating expenses 21.2 18.8 13 Depreciation and amortisation 0.5 0.4 ~ Operating profit before tax 17.9 16.0 12 PBT margin 45% 45% ~ (1) As disclosed in the
Slide 15: Perpetual Private Clients FUA up 9% since June 2006
Perpetual Private Clients FUA up 9% since June 2006 Funds under advice (1) $B 8 7.2 6.6 6.1 6 5.6 5.8 Fiduciary services 4 Financial 2 advisory 0 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 (1) Excludes externally advised do-it-yourself (DIY) and Investor Direct Portfolio Services (IDPS) funds under administ
Slide 16: Perpetual Private Clients - solid net inflows
Perpetual Private Clients - solid net inflows 30 Jun 2006 Net Other(1) 31 Dec 2006 FUA $b inflows $b $b $b Financial advisory 4.4 0.2 0.3 4.9 Fiduciary services 2.2 0.1 - 2.3 All Channels 6.6 0.3 0.3 7.2 Financial advisory – Net inflows driven by improved service delivery, new clients and improved r
Slide 17: Solid outlook for revitalised Perpetual Private Clients
Solid outlook for revitalised Perpetual Private Clients Dec 2006 Dec 2005 Change $b $b % Good starting position for Perpetual Private Clients FUA 7.2 6.1 18 second half 2007 Continued investment in sales capability Growth initiatives set to deliver improved revenues Outlook Good future growth prospe
Slide 18: Continued growth for Corporate Trust
Continued growth for Corporate Trust Dec 2006 Dec 2005 Change Six months ended $m $m % Total revenues 32.2 28.7 12 Operating expenses 14.1 12.5 13 Depreciation and amortisation 0.9 0.6 ~ Profit before tax 17.2 15.6 10 PBT Margin 53% 54% ~ 17
Slide 19: Corporate Trust FUA growth driven by RMBS
Corporate Trust FUA growth driven by Residential Mortgage Backed Securities (RMBS) Corporate Trust Funds Under Administration $B 200 185.0 178.6 (1) CMBS 152.8 and ABS 150 144.3 124.1 RMBS - non bank 100 RMBS FUA totals $149 billion 50 RMBS - bank 0 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 (1) Commercial
Slide 20: Expansion of Mortgage Services business
Expansion of Mortgage Services business Wignalls acquisition took place on 15 February 2007 Brings to Perpetual a national mortgage processing and settlement Why did we capability, which has been a key supplier to our mortgage services acquire business since 2005 Wignalls? Provides access to technol
Slide 21: Solid growth outlook in Corporate Trust
Solid growth outlook in Corporate Trust Dec 2006 Dec 2005 Change $b $b % Good growth in Corporate Perpetual Corporate Trust FUA 185.0 152.8 21 Trust business Securitisation FUA of $185.0 billion, an increase of 21% from December 2005 Acquisition of Wignalls Lending Mortgage Services further expands
Slide 22: Agenda
Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 21
Slide 23: Overview
Overview Continuing to build off a solid base – Sound fundamentals – Investment in revenue generating capabilities Results from our global equities business in Ireland now form part of our core business – Prior year amounts have been restated to include net establishment costs of our global equities
Slide 24: A solid financial result
A solid financial result Dec 2006 Dec 2005(1) Change Six months ended $m $m % Operating revenue 221.4 193.8 14 Operating expenses 110.2 94.8 16 EBITDA 111.2 99.0 12 Depreciation and amortisation 13.6 12.8 6 Interest 1.4 1.3 8 Plus: associate profits (eg. APRL) - 0.4 - Profit before tax 96.2 85.3 13
Slide 25: Business unit PBT margins remain strong
Business unit PBT margins remain strong Corporate Trust margin Perpetual Investments Perpetual Private Clients reducing as we grow our margin growing steadily as margin holds despite lower margin mortgage revenue grows investment in growth initiatives variations business % % % 60 60 60 54 55 53 50 5
Slide 26: Reconciliation of December 2006 OPAT to statutory profit
Reconciliation of December 2006 OPAT to statutory profit $M 100 30.0 98.8 80 68.8 60 40 20 0 Operating profit after tax Profit on sale Net profit after tax of Investments 25
Slide 27: Expense base increase due to initiatives and Sydney office relocation
Expense base increase due to initiatives and Sydney office relocation Dec 2006 Dec 2005(2) Change Six months ended $m $m % Employee related expenses 75.4 63.3 19 Occupancy expenses 6.0 2.9 107 G&A expenses 28.8 28.6 1 Total operating “cash” expenses 110.2 94.8 16 Equity remuneration amortisation 9.9
Slide 28: Continued focus on expenses
Continued focus on expenses Short term employee incentive costs higher in line with increased profits Variable costs Long term incentives linked to performance Full period impact of: – Property securities team Investment in – Direct property team growth – Structured products team capabilities contin
Slide 29: A strong balance sheet
A strong balance sheet Dec 2006 Jun 2006 Change $m $m % Cash holdings 177.5 203.0 (13) Investments at market value 125.5 146.1 (14) Liquid assets 303.0 349.1 (13) Net Assets 310.0 331.0 (6) Key Financial Ratios Gross debt(1) to book equity 14.5% 13.6% Interest coverage (EBITDA) times 79 75 Franking
Slide 30: $1.2 billion in structured investments on balance sheet
$1.2 billion in structured investments on balance sheet at 31 December 2006 Dec 2006 Dec 2005 Balance Sheet $m $m Structured Investment Asset 1,247 154 Structured Investment Liability (1,247) (154) Impact on shareholders’ funds - - Profit and Loss Account (six months to 31 December) Income from Stru
Slide 31: Dividend policy is to pay out 90% of underlying cash earnings
Dividend policy is to pay out 90% of “underlying” cash earnings to shareholders $m Operating profit after tax 68.8 Add: Equity amortisation costs 9.9 90% 2006 Underlying cash earnings 78.7 Payout = $70.8m ratio Number of shares on issue (million) 41.0 Dividend per share (cents) 173 30
Slide 32: Agenda
Agenda Group highlights – David Deverall Financial results – John Nesbitt Outlook – David Deverall 31
Slide 33: Good platform for continued profit growth
Good platform for continued profit growth – Industry fundamentals favourable – Continue to maximise core business potential (recent fund management price increases well implemented) – Inflows into new managed funds (credit enhanced, structured, property securities) – Global equities – foundations se
Slide 34: Favourable near term outlook
Favourable near term outlook – Strong second half starting position for funds under management and funds under advice and administration – Healthy pipeline – Good near term prospects subject to market conditions Full year profit guidance to be given in the Chairman’s letter to shareholders scheduled
Slide 35: 2007 Half Year Results
2007 Half Year Results Analyst and Shareholder Briefing 21 February 2007