Mcmillan Shakespeare Limited · ASX:MMS
Mcmillan Shakespeare — CLSA Down Under Tour (March 2011)
36 slides from Mcmillan Shakespeare's conference presentation, Mar 7, 2011
Slide 1: CLSA Presentation March 2011
MMS Group For personal use only CLSA Presentation March 2011
Slide 2: CLSA Presentation
Page 2 CLSA Down Under Tour Presentation For personal use only CLSA Presentation A new, different and more capable organisation is emerging from the combination of the Group Remuneration Services business with the Asset Management business. Company overview and revenue model Financial highlights and
Slide 3: Company Overview
Page 3 CLSA Down Under Tour Presentation For personal use only Company Overview MMS is a unique provider of workplace benefits and vehicle solutions in Australia. Fleet management business of Interleasing Australia acquired in April 2010. The combined business provides salary packaging administratio
Slide 4: Revenue Model
Page 4 CLSA Down Under Tour Presentation For personal use only Revenue Model Salary packaging administration fees: - annuity income stream; paid directly and regularly from employees’ salary. Interest income. Facilitation and procurement fees for assisting with novated lease settlements. Net interes
Slide 5: Financial highlights 1HFY11
Page 5 CLSA Down Under Tour Presentation For personal use only Financial highlights 1HFY11 Consolidated NPAT of $20.5m. NPAT and EPS growth of 83% on PCP. Group Remuneration Services NPAT of $15.0m or 35% growth. Asset Management NPAT of $6.6m. Interim dividend of 16 cents per share (10 cents PCP).
Slide 6: Financial History
Page 6 CLSA Down Under Tour Presentation For personal use only Financial History FY05 FY06 FY07 FY08 FY09 FY10 $’000 $’000 $’000 $’000 $’000 $’000 Total revenue 35,838 48,721 54,536 66,624 77,259 131,021 Normalised pre tax profit from continuing operations 7,915 15,013 19,079 24,919 28,912 39,904 No
Slide 7: Group Remuneration Services
Page 7 CLSA Down Under Tour Presentation For personal use only Group Remuneration Services Group Remuneration Services segment definition: The segment provides administrative services in respect of salary packaging and facilitates the settlement of motor vehicle novated leases for customers, but doe
Slide 8: What is salary packaging?
Page 8 CLSA Down Under Tour Presentation For personal use only What is salary packaging? Australia’s taxation system allows tax concessions for certain employee benefits and for certain industry sectors which makes salary packaging attractive. Eligible employees increase their disposable income by u
Slide 9: What is a novated lease?
Page 9 CLSA Down Under Tour Presentation For personal use only What is a novated lease? Enables employees to finance and operate a personal vehicle using their pre-tax income. A three way agreement between financier, employee and employer. Employee enters into a lease directly with the financier the
Slide 10: Remuneration Services 1H FY11 Results
Page 10 CLSA Down Under Tour Presentation For personal use only Remuneration Services 1H FY11 Results 1HFY10 1HFY11 % Comment $000 $000 Inc Segment revenue 43,098 53,618 24% Employee expenses 18,612 20,775 12% Significantly below revenue growth. Depn and amort of PPE and software 873 1,537 76% Refle
Slide 11: Asset Management
Page 11 CLSA Down Under Tour Presentation For personal use only Asset Management Asset Management segment definition: The segment provides financing and ancillary management services associated with motor vehicles, commercial vehicles and equipment.
Slide 12: Asset Management
Page 12 CLSA Down Under Tour Presentation For personal use only Asset Management Financing and management services associated with motor vehicles, commercial vehicles and equipment. A financier can provide funding but this ignores the management of the asset during its life. Fleet Management Organis
Slide 13: The Asset Life Cycle
Page 13 CLSA Down Under Tour Presentation For personal use only The Asset Life Cycle In-Life Procurement Finance Disposal Services Purchase the Owned, Operating Fuel, insurance, Sale of the asset – vehicle / asset lease, finance maintenance, tyres, auction, dealers, – preferred lease, CHP, chattel r
Slide 14: Income Streams
Page 14 CLSA Down Under Tour Presentation For personal use only Income Streams Income Streams Income streams – more than interest margin! Management fees & Disposal Finance Finance – brokerage / interest 34% 33% margin. Management fees and disposal income. Procurement & In-Life Services Procurement
Slide 15: Managing Residual Value Risk
Page 15 CLSA Down Under Tour Presentation For personal use only Managing Residual Value Risk Residual Values are set for term and kilometres by a Residual Value Committee. Proactive contract re-writes are undertaken to mark-to-market residual values where vehicle usage varies to that at inception e.
Slide 16: Asset Management financial performance
Page 16 CLSA Down Under Tour Presentation For personal use only Asset Management financial performance 1HFY11 $000 Segment revenue 82,683 Depreciation of motor vehicle fleet 32,079 Interest on fleet financing 5,032 Motor vehicle fleet expenses 28,291 Employee expenses 6,197 Other expenses 1,610 Tota
Slide 17: Strengths, Service Record and Sensitivities
Page 17 CLSA Down Under Tour Presentation For personal use only Strengths, Service Record and Sensitivities
Slide 18: What are MMS' comparative/competitive strengths?
Page 18 CLSA Down Under Tour Presentation For personal use only What are MMS’ comparative/competitive strengths? A unique market position: the only integrated provider of salary packaging and “one vehicle provider” solutions for both employers and employees. Industry leading service levels. Scale in
Slide 19: Our unique market position
Page 19 CLSA Down Under Tour Presentation For personal use only Our unique market position Core Skills Core Skills Operating Lessors/ Fleet Proactive sales culture Managing vehicle value Salary Packagers Retail sales and marketing chain: procurement, Managers Budgeting/ BPO processing maintenance an
Slide 20: Productivity and customer satisfaction indices
Page 20 CLSA Down Under Tour Presentation For personal use only Productivity and customer satisfaction indices Group Remuneration Services Productivity Index (7/08 = 100) [Rolling 3 month Revenue (ex SP Interest) / FTE] MMS Customer Satisfaction Index December 2008 = 100 140 250 135 130 200 125 120
Slide 21: Sensitivities
Page 21 CLSA Down Under Tour Presentation For personal use only Sensitivities Queensland flood impact not material (current estimated pre-tax loss to business of $1m). Around $0.3m of this insured, subject to “flood” definition. Queensland economy post floods/cyclone. New car sales. Second hand car
Slide 22: Growth Drivers
Page 22 CLSA Down Under Tour Presentation For personal use only Growth Drivers
Slide 23: Growth opportunities
Page 23 CLSA Down Under Tour Presentation For personal use only Growth opportunities Salary Packaging Synergies Asset Management Increase salary packages Cross-sell salary Grow the loan book over through higher packaging and novated time with operating and penetration rate and new leases to ILA clie
Slide 24: Why is the novated lease market growing?
Page 24 CLSA Down Under Tour Presentation For personal use only Why is the novated lease market growing? Relatively young <20 year old. In the majority of cases a novated lease provides a more cost effective outcome than using post tax income. Allows vehicle to be purchased without the payment of Go
Slide 25: Update and Outlook
Page 25 CLSA Down Under Tour Presentation For personal use only Update and Outlook
Slide 26: 1HFY11 key activities and highlights
Page 26 CLSA Down Under Tour Presentation For personal use only 1HFY11 key activities and highlights Focus on integration, maintaining momentum in our core business and the disciplined prioritisation of tasks and opportunities / making choices / not trying to do everything at once. Integration Other
Slide 27: 1HFY11 key activities and highlights (cont'd)
Page 27 CLSA Down Under Tour Presentation For personal use only 1HFY11 key activities and highlights (cont’d) Disaster Recovery (DR) and Business Continuity plans (BCP) successfully deployed in QLD floods: - RemServ operated successfully for two weeks outside its premises. - All salary packaging pay
Slide 28: Outlook
Page 28 CLSA Down Under Tour Presentation For personal use only Outlook Continued, disciplined development of our core businesses. Industrial strength BPO. Ongoing growth through: - New business and cross-sell from our stronger post acquisition value proposition. - Increasing participation rates wit
Slide 29: Appendices
Page 29 CLSA Down Under Tour Presentation For personal use only CLSA Presentation Appendices Sources of revenue. Market opportunity. Summary balance sheet and gearing. Funding. 1H FY11 Cash flow.
Slide 30: Sources of revenue
Page 30 CLSA Down Under Tour Presentation For personal use only Sources of revenue Salary Packaging (including Novated Lease Novated Lease Operating Leases Management Services motor vehicles) Management Distribution Fees Recurring income. Portion of Recurring income. MMS can procure and ILA rents pa
Slide 31: Market opportunity
Page 31 CLSA Down Under Tour Presentation For personal use only Market opportunity Full FBT Rebatable FBT $17,000 Exempt $30,000 Exempt Types of Employers Government departments. Independent schools. Public hospitals. Public benevolent institutions. Private companies. Sporting clubs. Private not-for
Slide 32: Market opportunity (cont'd)
Page 32 CLSA Down Under Tour Presentation For personal use only Market opportunity (cont’d) Australian Fleet Lessors Association (AFLA) - Total Portfolio at July 2010 By Type of Facility (units/%) ILA is a tier 2 industry player. 40,867 - 8% - Operating ILA share of novated leases as % of Leases - F
Slide 33: Gearing
Page 33 CLSA Down Under Tour Presentation For personal use only Gearing MMS and Group Remuneration Asset Group Group Services (1) Management Balance at Balance at 31st Dec 2010 31st Dec 2010 31st Dec 2010 30th Jun 2010 $000 $000 $000 $000 Net debt 14,457 105,227 119,684 125,970 Book value of equity
Slide 34: Asset Management key balance sheet numbers
Page 34 CLSA Down Under Tour Presentation For personal use only Asset Management key balance sheet numbers 31st Dec 2010 30th June 2010 $000 $000 Operating lease assets 204,672 202,471 Finance leases 8,679 9,226 Fleet financing borrowings 108,000 112,727 Maintenance instalments received in advance 6
Slide 35: Funding
Page 35 CLSA Down Under Tour Presentation For personal use only Funding The Group recently renegotiated its borrowing arrangements for Interleasing. The objectives of the renegotiation were to: Provide longer-term funding facilities to enhance liquidity position; Reduce funding costs; and Provide gr
Slide 36: 1HFY11 cash flow
Page 36 CLSA Down Under Tour Presentation For personal use only 1HFY11 cash flow Group Remuneration Asset Unallocated/ MMS Group Services Management MMS Total $000 $000 $000 $000 Segment NPAT 15,022 6,606 (1,102) 20,526 Non-cash (non-fleet depreciation and fleet provision movements) 1,537 (1,314) -
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