Generation Development Group Limited · ASX:GDG
Generation Development — Investor Presentation (September 2020)
46 slides from Generation Development's investor presentation, Sep 17, 2020
Slide 1: Strategic growth initiatives and capital raising
17 September 2020 Generation Development Group Ltd Strategic growth initiatives and capital raising Grant Hackett Terence Wong Chief Executive Officer Chief Financial Officer Generation Life Generation Development Group Outthinking today.
Slide 2: Executive Summary
Executive Summary Recent strong growth and financial performance – FY20 NPAT growth of 25% (50% CAGR since FY17) and FUM growth of 21% (22% CAGR since FY17) Significant initiatives being implemented to accelerate GDG’s growth and diversification strategy, funded via an equity raising of up to $35 mi
Slide 3: Table of Contents
Table of Contents 1. Executive Summary 2 2. Generation Development Group – Company Overview 4 3. Investment in Lonsec 10 4. Solving Longevity Risk – New Annuity Product 20 5. The Offer 24 Generation Development Group | gendevelopmentgroup.com.au Appendix A. Risks 30 B. International Offer Restrictio
Slide 4: Company Overview
Company Overview Generation Development Group Generation Development Group | gendevelopmentgroup.com.au
Slide 5: A compelling shareholder value building model
Generation Development Group A compelling shareholder value building model Generation Development Group | gendevelopmentgroup.com.au Generation Development Group (ASX:GDG) is a licenced Pooled Development Fund (PDF) owning a recurring revenue producing life/investment income with a market capitalisa
Slide 6: Management team with a proven track record
Management team with a proven track record Generation Development Group EPS Sales $3.00 350 36% CAGR $2.50 41% CAGR 280 $2.00 210 Grant Hackett $1.50 140 Generation Development Group | gendevelopmentgroup.com.au $1.00 Chief Executive Officer – $0.50 70 Rob Coombe Generation Life $0.00 0 • Joined in
Slide 7: Today's announcement represents a significant development in executing GDG's growth strategy
Today’s announcement and capital raising represents a significant development in executing on both aspects of GDG’s growth strategy Generation Development Group Generation Development Group Today Growth Strategy Continuing to deliver record FUM growth and taking market share Diversify earnings while
Slide 8: Generation Life FY20 Highlights & Key Performance Measures
Generation Life FY20 Highlights & Key Performance Measures Generation Development Group Life Business FUM Life Product Sales Market share APL’s Product rating $1,295 m $332 m 38.1% 420 Highly Recommended Generation Development Group | gendevelopmentgroup.com.au Up 21% Up 48% March quarter 2020 Up 7%
Slide 9: FY20 Financial result summary
FY20 Financial result summary Generation Development Group FY20 FY19 Change Change % Revenue* (A$'000) 18,964 15,333 3,631 24 Expenses** (A$'000) (16,148) (13,083) (3,065) (23) Generation Development Group | gendevelopmentgroup.com.au Underlying NPAT (A$'000) 2,816 2,250 566 25 Underlying EPS (cps)
Slide 10: Investment in Lonsec
Investment in Lonsec Generation Development Group | gendevelopmentgroup.com.au
Slide 11: Strategic investment overview
Strategic investment overview Rationale for GDG’s investment in Lonsec 1 Acquisition of a 37% stake in Lonsec, a leading qualitative research firm providing ratings to a blue-chip client base 2 Acquisition is expected to be mid to high single digit EPS accretive1 Generation Development Group | gende
Slide 12: Company overview - Lonsec
Company overview Investment in Lonsec Established in 1994 with Provides research and/or offices in Sydney and ratings for over 1,900 Melbourne products and funds FY20 Revenue: Generation Development Group | gendevelopmentgroup.com.au $29.8 million One of Australia’s largest Post the Royal Commission
Slide 13: Company overview - Lonsec services
Company overview Investment in Lonsec ▪ Market leading investment ▪ Fast growing emerging player Market ▪ A leading research and ratings ▪ A leading superannuation research platform providing in burgeoning Dealer Group/ provider in the investment ratings and research provider financial professionals
Slide 14: Historical financials - Lonsec
Historical financials Investment in Lonsec Revenue ($'000) FUM ($'m) - LIS Growth Drivers $40,000 $800 • Lonsec Research has recently 659 29,700 29,817 embarked on a significant investment $30,000 26,846 $600 in technology, including data science 426 to facilitate greater insights in a more $20,000
Slide 15: Investment highlights
Investment highlights Rationale for GDG’s investment in Lonsec 1 Strong industry and regulatory tailwinds increasing reliance on independent specialists 2 Resilient, recurring revenue stream from core research offering Generation Development Group | gendevelopmentgroup.com.au 3 Emerging Managed Acco
Slide 16: Investment highlights (continued)
Investment highlights (continued) Rationale for GDG’s investment in Lonsec Strong industry and regulatory tailwinds increasing Resilient, recurring revenue stream from core Direct exposure to retail capital in 1 2 3 reliance on independent specialists research offering a fast-growing product segment
Slide 17: Investment highlights (continued)
Investment highlights (continued) Rationale for GDG’s investment in Lonsec 4 Incumbent player in an attractive market niche 5 Gatekeeper to key retail distribution channels 6 Significant M&A growth opportunities • Lonsec is an incumbent in an attractive market • Post the Royal Commission, Lonsec is
Slide 18: Transaction overview
Transaction overview Investment in Lonsec Transaction overview GDG representation and controls ▪ Acquiring a 37% stake in Lonsec Holdings Pty Ltd GDG may appoint two Directors (of a total of six), although Board until October 2021 the vendors will nominate one of these Transaction ▪ Other shareholde
Slide 19: Transaction documents details
Transaction documents details Investment in Lonsec ▪ GDG has entered into agreements to obtain a 37% stake in Lonsec by: Acquisition ▪ Acquiring Lonsec shares from exiting shareholders (Share Sale); and ▪ Subscribing for further Lonsec shares (Subscription). ▪ Total consideration of up to $26.7m. ▪
Slide 20: Solving Longevity Risk – New Annuity Product
New Annuity Product Solving Longevity Risk – Generation Development Group | gendevelopmentgroup.com.au
Slide 21: Annuity Product overview
Annuity Product overview Rationale for developing a new GDG annuity product to address longevity risks 1 Large potential addressable market expected to double above next 10 years to over 1.185tn1 2 Market soundings indicate strong advisor support for proposed product, which is unique to the current
Slide 22: Solving Longevity Risk
Solving Longevity Risk Significant market opportunity for an annuity product to address longevity risk Market opportunity Retirement Landscape • One of the key challenges facing Australians is managing the retirement risk of longevity or in other words outliving savings for retirement • GDG has iden
Slide 23: Introducing the proposed GDG Lifetime Annuity Product
Solving Longevity Risk Introducing the proposed GDG Lifetime Annuity Product GDG has identified a significant market opportunity supported by Financial Adviser testing and is in the process of developing an innovative product to capitalise on this opportunity – a market linked lifetime annuity GDG L
Slide 24: The Offer
The Offer Capital raising details Generation Development Group | gendevelopmentgroup.com.au
Slide 25: Capital raising details
Capital raising details The Offer Offer Size & ▪ Fully underwritten institutional placement (“Placement”) and partially underwritten 1 for 6.7 pro-rata accelerated non-renounceable entitlement Structure offer (“Entitlement Offer”) to raise $30m-$35m ▪ All shares under the Placement and Entitlement O
Slide 26: Sources & uses of proceeds / pro-forma balance sheet
Sources & uses of proceeds / pro-forma balance sheet The Offer Sources of Proceeds ($m) Min Max 30 June Acquisition & Pro Forma 30 $ Million 2020 Equity Raise2 June 2020 Placement 21.9 21.9 Cash 11.7 11.7 Rights Issue 8.1 13.1 New annuity product cash reserves 0.0 7.4 7.4 Total Sources 30.0 35.0 Inv
Slide 27: Timetable
Timetable The Offer Event Date Announcement of the Capital Raising Thursday 17 September 2020 Announcement of results of the Institutional Entitlement Offer, trading resumes on an ex-entitlement basis Monday 21 September 2020 Record date for Retail Entitlement Offer (7.00pm (Melbourne time)) (Record
Slide 28: Underwriting agreement details
Underwriting agreement details The Offer GDG has entered into an underwriting agreement under which Moelis Australia Advisory Pty Ltd and Morgans Corporate Limited (the Underwriters) have agreed to act as joint lead managers of the Offer and bookrunners and underwriters of the Placement and Institut
Slide 29: Underwriting agreement details (cont.)
Underwriting agreement details (cont.) The Offer In addition, in some cases an Underwriter’s ability to terminate the Underwriting Agreement will depend (amongst other things) on whether the event has or is likely to have a material adverse effect on the success, marketing or settlement of the Offer
Slide 30: A. Risks
A. Risks Appendix Generation Development Group | gendevelopmentgroup.com.au
Slide 31: Risks specific to GDG
Risks specific to Generation Development Group Appendix A ▪ GDG derives a significant proportion of its earnings from fees and charges based on the level of funds under management (FUM). The level of FUM will reflect (in addition to other factors such as the funds flowing into and out of FUM) the in
Slide 32: Risks specific to GDG
Risks specific to Generation Development Group Appendix A ▪ Systems failures or errors in unit pricing of investments are issues affecting the broader funds management industry that may result in Unit pricing errors significant financial losses and brand damage to a number of financial services orga
Slide 33: Risks specific to GDG
Risks specific to Generation Development Group Appendix A ▪ Certain GDG entities are required to meet capital, prudential and liquidity standards prescribed by the Australian Prudential Regulation Authority (APRA) and other regulators. If these entities fail to meet these prudential standard require
Slide 34: Risks specific to GDG
Risks specific to Generation Development Group Appendix A ▪ The payment of dividends on GDG shares is dependent upon a range of factors including the profitability of GDG, the availability of cash, Future payment of capital requirements of the business and other business obligations. Any future divi
Slide 35: Risks specific to GDG
Risks specific to Generation Development Group Appendix A ▪ GDG and the financial services industry relies heavily on information technology to conduct an efficient and cost-effective business. Therefore, any significant or sustained failure or inadequacy in GDG’s core technology systems or cyber se
Slide 36: Transaction Risks
Transaction Risks Appendix A Non-controlling ▪ GDG is not acquiring a controlling interest in Lonsec. While it will be afforded certain levels of protection by virtue of a Shareholding Deed and board representation, it will not be able to, on a standalone basis, control and make decisions. This coul
Slide 37: Transaction Risks
Transaction Risks Appendix A ▪ The Generation Life investment bonds hold a “highly recommended” rating from Lonsec Research Pty Ltd. GDG considers this rating to be an important factor in its ability to sell investment bonds which are a key contributor to its earnings. Whilst Lonsec has strict proce
Slide 38: Lonsec Business Risks
Lonsec Business Risks Appendix A Lonsec’s development ▪ Lonsec is focused on building its Managed Account product. Although this operating model has been accepted by the regulators and is used extensively by Lonsec’s peers, there is a risk that this activity results in a perceived conflict of intere
Slide 39: General Risks
General Risks Appendix A ▪ Changes in general economic factors such as economic growth, interest rates, exchange rates, inflation and business and consumer confidence and general market factors may have an adverse impact on GDG’s (references to GDG includes GDG as standalone entity as well as all re
Slide 40: General Risks
General Risks Appendix A ▪ Current economic conditions can impact upon the availability of equity funding that may be required to support the cash flow of a business. Capital availability GDG’s operations and growth may be affected by the availability of funding which would impact on GDG’s ability t
Slide 41: General Risks
General Risks Appendix A ▪ GDG prepares its general purpose financial statements in accordance with IFRS and the Corporations Act. Australian Accounting Standards are not within the control of GDG or its board and are subject to amendment from time to time, and any such changes may impact on GDG’s s
Slide 42: B. International Offer Restrictions
Appendix B. International Offer Restrictions Generation Development Group | gendevelopmentgroup.com.au
Slide 43: International offer restrictions
International offer restrictions Appendix B This document does not constitute an offer of new ordinary shares in Generation Development Group Limited (New Shares) in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares
Slide 44: C. Disclaimers
Appendix C. Disclaimers Generation Development Group | gendevelopmentgroup.com.au
Slide 45: Disclaimers
Disclaimers Appendix C No reliance To the maximum extent permitted by law, the information contained in this presentation is given without any liability whatsoever being accepted by Generation Development Group Limited (GDG) or any of its related bodies corporate or their respective directors, offic
Slide 46: Thank you
Outthinking today. Thank you Generation Development Group | gendevelopmentgroup.com.au This presentation has been prepared by Generation Development Group Limited ABN 90 087 334 370 (GDG) and authorised by the Board. The Zenith Investment Partners (“Zenith”) Australian Financial Services License No.
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