Computershare Limited · ASX:CPU
Computershare — H1 2005 Earnings Presentation
60 slides from Computershare's earnings presentation, Feb 17, 2005
Slide 1: Interim Results 2005 Presentation
Interim Results 2005 Presentation 17 February 2005 1
Slide 2: Presentation framework
This presentation is structured around the following framework Introduction Financial CEO’s Report Results 2
Slide 3: Summary of Results
Summary of Results Introduction ¾ Normalised EPS (pre goodwill) of 10.21 cents, up 20%. ¾ Total revenue of $502.1m, up 26% or up 2.5% excluding FY04 & 1H05 acquisitions. ¾ Operating Cash Flows of $50.9 m, up 19.5%. ¾ Operating Costs (excluding cost of sales and acquisitions) of $237.4 m, a 1.8% decr
Slide 4: CPU Revenues are driven by multiple factors
CPU Revenues are driven by multiple factors Introduction Revenue Type Revenue Driver Risk mitigation Register Maintenance Growth in clients & Retain existing clients, win holders market share 7% Corporate Actions Market conditions & M&A Win new business; link to 4% activities key stakeholders, clien
Slide 5: Global Equities Market
Global Equities Market Introduction Historical Equity Issuance Data Annual M & A Book to Bill Ratio 4,000 1.8 3,500 3,000 1.5 $ Billions 2,500 2,000 1.3 1,500 1,000 1.0 500 0.8 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2
Slide 6: Global Interest Rate Market
Global Interest Rate Market Introduction % % UK US 8 8 6 6 4 4 2 2 0 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 % Canada 8 6 4 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 6
Slide 7: Computershare Strengths
Computershare Strengths Introduction ¾ Recurring Revenue - >70% of revenue is of a recurring nature. ¾ Global Diversification – Across more than 15 countries. ¾ High Margins – EBITDA margins ~ 20%. ¾ Low Capital Requirements – Capex < Depreciation expense. ¾ Exposure to northern hemisphere interest
Slide 8: Introduction Financial Results CEO's Report
Introduction Financial CEO’s Report Results 8
Slide 9: Group Financial Performance – A$m's
Group Financial Performance – A$m’s Financial Results 1H05 1H04 Variance Sales Revenue 480.0 378.2 27% Interest & Other Income* 22.1 21.3 4% Total Revenue 502.1 399.5 26% Operating Costs* 408.4 317.9 (28%) Share of Net (Profit)/Loss of Associates (0.6) 1.5 Normalised EBITDA 94.3 80.1 18% Non-Recurri
Slide 10: Normalised Basic EPS Performance (pre goodwill)
Normalised Basic EPS Performance (pre goodwill) Financial Results cents Normalised Basic EPS (pre goodwill) (rolling 12 months) 21 19 17 15 13 11 9 7 5 Dec'01 Jun'02 Dec'02 Jun'03 Dec'03 Jun'04 Dec'04 Normalised Basic EPS (pre goodwill) 10
Slide 11: Half Year Comparisons – Revenue & EBITDA
Half Year Comparisons – Revenue & EBITDA Financial Results Revenue & EBITDA $Am 103.3 $Am 550 94.3 100 500 79.5 80.1 450 80 R E e 400 54.4 B v 60 I e T n 350 D u A e 40 495.2 502.1 300 355.7 364.1 399.5 20 250 200 0 1H03 2H03 1H04 2H04 1H05 11 Revenue Normalised EBITDA
Slide 12: Half Year Comparisons – Revenue & EBITDA
Half Year Comparisons – Revenue & EBITDA Financial Results 1H Revenue & EBITDA 2H Revenue & EBITDA $Am $Am $Am $Am 103.3 500 500 94.3 100 100 450 450 80.1 79.5 R 80 E R 74.4 80 e E e v 400 B 400 B I v e I T e T n 54.4 60 D n 60 D u 502.1 u e 350 A 350 495.2 A e 40 40 300 399.5 300 384.5 355.7 364.1
Slide 13: Regional Analysis – Revenue & EBITDA
Regional Analysis – Revenue & EBITDA Financial Results Total Revenue Breakdown EBITDA Breakdown 33% 36% 40% 43% 27% 21% Asia Pacific Europe North America Asia Pacific Europe North America 13
Slide 14: Half Year Comparisons – Costs
Half Year Comparisons – Costs Financial Results Operating Costs Acquisitions $Am 400 98.7 102.2 19.2 300 200 300.8 283.1 298.7 294.6 306.2 100 0 1H03 2H03 1H04 2H04 1H05 14 Note: FY03 & 1H FY04 restated for cost of sales adjustment.
Slide 15: Synergies realised from GSC and Transcentive
Synergies realised from GSC and Transcentive Financial Results Expected Realised Surplus / AUD$m Synergies Synergies (Shortfall) GSC 10.4 9.9 (0.5) Transcentive - 1.5 1.5 Total 10.4 11.4 1.0 Since time of ownership 15
Slide 16: Analysis of EPS
Analysis of EPS Financial Results Normalised EPS (pre goodwill, post preference dividend) 12 10 8 cents 6 10.53 10.21 4 8.02 8.49 2 3.76 0 1H03 2H03 1H04 2H04 1H05 Normalised EPS (pre goodwill) 16
Slide 17: Returns improving, Cost of Capital declining
Returns improving, Cost of Capital declining Financial Results 18% ROIC vs. WACC 16% 14% 12% 10% 8% 6% 1H03 2H03 1H04 2H04 1H05 WACC ROIC 17
Slide 18: Technology Costs – Establishing Global Platform
Technology Costs – Establishing Global Platform Financial Results A$m % 51.9 22% 48.4 49.5 50.0 20% 43.6 18% 42.6 40.0 16% 14% 14% ¾ All R&D technology costs 12% 11% 11% are expensed. 30.0 12% 10% ¾ Increase on 1H05 driven 10% by acquisitions. 20.0 8% 6% 10.0 4% 2% 0.0 0% 1H03 2H03 1H04 2H04 1H05 Te
Slide 19: Analysis of Technology Costs
Analysis of Technology Costs Financial Results Analysis of Technology Spend 1% 3% 32% 46% 18% Development Infrastructure Maintenance External Bureau Administration 19
Slide 20: Net Operating Cash Flows
Net Operating Cash Flows Financial Results $Am Operating Cash Flows & Capital Expenditure 100 93.5 ¾Gearing increased to 33% ¾Leverage ratio low despite acquisitions 80 60 50.9 43.1 42.6 40 33.1 20 16.4 11.5 14.2 7.1 7.2 0 1H03 2H03 1H04 2H04 1H05 Cashflow from Ops Cap Ex - PPE 20
Slide 21: Capital Expenditure
Capital Expenditure Financial Results CPU Group Capex $Am 17.5 0.8 15 0.3 4.1 12.5 3.7 0.6 10 2.9 2 2.0 0.1 7.5 0.3 1.8 0.5 0.7 5 0.9 2.5 4.3 8.5 5.3 8.7 8.6 0 1H03 2H03 1H04 2H04 1H05 Information Technology Document Services Facilities Occupancy Other 21
Slide 22: Receivables Management
Receivables Management Financial Results Days DSO 70 66 61 60 60 57 Receivable Days 50 40 30 20 10 0 FY02 FY03 FY04 1H05 22
Slide 23: Interest Rate Sensitivity
Interest Rate Sensitivity Financial Results A$m PBT 100 Impact 80 60 40 20 0 -2.50% -2.00% -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% -20 -40 Exposure Hedged exposure 100% Hedged -60 23
Slide 24: Equity Management – Interim Dividend of 5 cps
Equity Management – Interim Dividend of 5 cps Financial Results ¾ EPS – Normalised Basic (post goodwill) 7.99 cents ¾ EPS – Normalised Basic (pre goodwill) 10.21 cents ¾ Interim Dividend (10% franked) 5 cents ¾ Current Yield * 1.5% * Based on share price of AUD $6.50. 24
Slide 25: Franking Account
Franking Account Financial Results Reasons why our dividend is not 100% franked: ¾ Increased level of dividends on ordinary shares – FY02 ($19m ), FY03 ($27m), FY04 ($30m) and 1H05 ($27m); ¾ Dividends on Preference Shares – FY02 ($5m), FY03 ($12m) and FY04 ($8m); ¾ Increased number of ordinary share
Slide 26: Equity Management – Reset Preference Share Conversion
Equity Management – Reset Preference Share Conversion Financial Results ¾ Recent changes in Accounting Standards treat Reset Preference Shares (RPS) as debt (at 5.5% post tax). ¾ Announced conversion of RPS to Equity on 19th August, 2004. ¾ Converting on 30 September 2004 at trailing 20 day VWAP (wi
Slide 27: Impact of IFRS on Computershare
Impact of IFRS on Computershare Financial Results Issue Change Impact on CPU Goodwill Semi -annual impairment Major Significance – Elimination of goodwill amortisation charges Amortisation testing of goodwill. will result in increased reported profits, subject to annual impairment testing. Financial
Slide 28: Debt Re-financing
Debt Re-financing Financial Results ¾ Approached US Private Placement market in January 2005 ¾ Looked to fund US$200m for Equiserve cash component ¾ Offers from 24 institutions for over US$730m ¾ Accepted offers from 12 institutions for US$318m for funding between 6 and 12 years ¾ Rates average arou
Slide 29: Financial Summary
Financial Summary Financial Results ¾ EPS up 20% to 10.21 cents per share ¾ Revenue up 26% to $502.1m 29
Slide 30: Market Overview
Market Financial CEO’s Report Overview Performance 30
Slide 31: Regional Highlights – Asia/Pacific
Australia New Zealand Regional Highlights – Asia/Pacific India Philippines Hong Kong 31
Slide 32: Strategic Opportunities – Asia/Pacific
Strategic Opportunities – Asia/Pacific CEO’s Report ¾Management of Unit Trusts (Mutual Funds) with technology from Indian Joint Venture ¾Expanding Plans business into Asia ¾Continuing to seek opportunities in Japan and Korea 32
Slide 33: Regional Highlights - EMEA
Ireland United Kingdom Regional Highlights - EMEA Germany Russia South Africa 33
Slide 34: Strategic Opportunities - EMEA
Strategic Opportunities - EMEA CEO’s Report ¾ UK ¾ NHS Hospitals ¾ Expect to increase revenues 3-4 times over the next few years ¾ Building on success in this project to create further opportunities downstream ¾ CORGI ¾ Similar legislation to be introduced in Ireland ¾ Europe ¾ Opportunities for fur
Slide 35: Regional Highlights – North America
CEO’s Report United States of America Canada Regional Highlights – North America 35
Slide 36: Strategic Opportunities – North America
Strategic Opportunities – North America CEO’s Report ¾ USA ¾ Capitalise on EquiServe acquisition ¾ Cross-Sell opportunities arising from EquiServe ¾ Further, potential growth opportunities as registry industry in USA re-evaluates following EquiServe acquisition ¾ Canada & USA ¾ Grow Fixed Interest s
Slide 37: EquiServe Update
EquiServe Update CEO’s Report ¾ State regulatory approval received regarding competition aspects ¾ Awaiting OCC approval to transfer national Trust licence from EquiServe to Computershare ¾ Integration planning well advanced 37
Slide 38: Management of Global Business
Management of Global Business CEO’s Report Regional P&L Responsibility Global P&L and/or Strategic Responsibility Asia/Pacific EMEA North America Stakeholder Capital Markets Technology Corporate Share Registry Relationship Group Services Plans Proxy Solicitation Market Structures Document Services P
Slide 39: Outlook
Outlook CEO’s Report ¾ Some early signs of improved pipeline activity in EMEA and North America that has excited the market ¾ But! Pipeline activity takes time to convert to revenue for our businesses ¾ At this time we remain with our previous guidance of: ¾ Revenue growth > 10% ¾ Growth in EPS > 20
Slide 40: Questions?
40 QUESTIONS? Computershare
Slide 41: First Half FY2005 Results Presentation
Financial Results First Half FY2005 Results Presentation 17 February 2005 41
Slide 42: Appendix: Interim Results 2005 Presentation
Financial Results Appendix: Interim Results 2005 Presentation 17 February 2005 42
Slide 43: Appendix 1: Group Comparisons
Appendix 1: Group Comparisons Financial Results Group Comparisons 43
Slide 44: Revenue Breakdown
Revenue Breakdown Financial Results 1H05 1H04 Var Register Maintenance 238.1 215.1 11% Corporate Actions 78.2 74.7 5% Stakeholder Relationship M'ment 43.7 15.7 178% Employee Share Plans 59.6 45.7 30% Document Services 28.4 21.2 34% Mutual Funds 18.8 0.8 n/a Technology & Other Revenues 35.3 26.3 34%
Slide 45: Half Year Comparisons - Revenue
Half Year Comparisons - Revenue Financial Results $Am 244.2 238.1 215.0 78.2 74.7 71.8 57.5 55.2 59.6 43.7 45.7 29.8 28.4 21.2 18.8 15.7 8.9 0.8 Register Maintenance Corporate Actions Stakeholder Employ ee Share Plans Document Serv ices Mutual Funds Relationship Management 1H04 2H04 1H05 45
Slide 46: Regional Analysis - Revenue
Regional Analysis - Revenue Financial Results $Am 83.0 81.9 73.2 44.0 40.2 25.1 21.9 17.4 18.1 14.8 16.3 9.1 8.2 4.5 4.1 2.4 2.5 0.0 Register Maintenance Corporate Actions Stakeholder Employee Share Plans Document Services Mutual Funds Relationship Management Asia Pacific Europe North America 46
Slide 47: Half Year Comparisons – Operating Costs
Half Year Comparisons – Operating Costs Financial Results $Am 185.8 174.8 139.3 104.9 92.5 67.4 51.4 48.5 41.6 36.7 34.5 34.9 26.6 23.5 19.3 13.9 16.1 7.9 Cost of Sales Personnel Occupancy Other Direct Technology Corporate 1H04 2H04 1H05 47
Slide 48: Effective Tax Rate
Effective Tax Rate Financial Results ¾ Headline effective tax rate for 1H05 is 18.2% (1H04 20.8%). ¾ Normalised headline effective tax rate for 1H05 is 23.0% (1H04 31.7%). ¾ The underlying effective tax rate (the tax rate adjusted for one off, non recurring items and non deductible goodwill charges)
Slide 49: Key Financial Ratios
Key Financial Ratios Financial Results times EBITDA interest coverage Net Financial Indebtedness to EBITDA 25 times (12 month rolling) 22.6 20.1 2.0 20 14.1 1.5 1.3 1.3 15 1.2 12.4 11.5 1.0 0.8 10 0.7 5 0.5 0 0.0 1H03 2H04 1H04 2H04 1H05 1H03 2H03 1H04 2H04 1H05 % Gearing (Net Debt / Net Debt + Equi
Slide 50: Risk Management - Interest Rate Sensitivity
Risk Management - Interest Rate Sensitivity Financial Results Interest Rate Hedging Strategy: - Minimise downside risk in Exposure to low interest rate No exposure environment interest rates 32% Policy: - Minimum hedge of 25% / 28% Maximum hedge of 75% - Minimum term 1 year / Maximum term 5 years -
Slide 51: Risk Management – Average Funds Balances
Risk Management – Average Funds Balances Financial for 6 months ending 31 December 2004 Results By Category By Country Dividend US Australia 14% Sharesave 10% 2% 26% Dissenter 7% Canada 46% Corporate Actions UK 19% 42% Broker Trust Regular 24% Trust 10% Average Fund Balance - A$3.6b 51
Slide 52: Appendix 2: Country Summaries
Appendix 2: Country Summaries Financial Results Country Summaries 52
Slide 53: Australia Half Year Comparison
Australia Half Year Comparison Financial Results $Am Revenue Breakdown $Am Total Revenue 48.9 47.4 125.9 43.5 114.9 109.3 86.8 31.1 30.9 86.6 25.2 21.9 17.1 16.3 8.2 4.2 4.4 4.4 4.5 2.1 1H03 2H03 1H04 2H04 1H05 Register Maintenance Corporate Actions Stakeholder Relationship Employee Share Plans Docu
Slide 54: New Zealand Half Year Comparison
New Zealand Half Year Comparison Financial Results $NZm Total Revenue $NZm Revenue Breakdown 8.7 9.0 6.9 6.8 8.3 6.3 7.4 7.1 2.2 1.4 1.0 1H03 2H03 1H04 2H04 1H05 Register Maintenance Corporate Actions 1H04 2H04 1H05 54
Slide 55: Hong Kong Half Year Comparison
Hong Kong Half Year Comparison Financial Results $HKm Total Revenue Revenue Breakdown $HKm 108.3 73.4 99.1 70.0 97.4 89.6 58.0 71.1 38.3 31.5 24.0 1H03 2H03 1H04 2H04 1H05 Register Maintenance Corporate Actions 1H04 2H04 1H05 55
Slide 56: United Kingdom Half Year Comparison
United Kingdom Half Year Comparison Financial Results GBPm Revenue Breakdown Total Revenue GBPm 25.3 41.6 23.1 22.6 37.0 36.3 33.8 33.7 5.9 5.9 4.8 5.0 3.2 3.6 2.9 2.8 2.4 1.5 1.6 1.6 1H03 2H03 1H04 2H04 1H05 Register Maintenance Corporate Actions Stakeholder Employee Share Plans Document Services R
Slide 57: Ireland Half Year Comparison
Ireland Half Year Comparison Financial Results EUROm Total Revenue EUROm Revenue Breakdown 2.5 4.3 4.3 2.3 2.2 3.8 3.6 2.7 0.9 0.7 0.3 1H03 2H03 1H04 2H04 1H05 Register Maintenance Corporate Actions 1H04 2H04 1H05 57
Slide 58: South Africa Half Year Comparison
South Africa Half Year Comparison Financial Results ZARm Total Revenue ZARm Revenue Breakdown 94.7 93.4 90.5 86.8 90.1 86.5 88.3 83.7 4.5 6.4 3.4 0.2 0.5 1H03 2H03 1H04 2H04 1H05 Register Maintenance Corporate Actions Stakeholder Relationship Management 1H04 2H04 1H05 58
Slide 59: United States Half Year Comparison
United States Half Year Comparison Financial Results Total Revenue USDm USDm Revenue Breakdown 98.8 25.3 94.8 22.6 21.4 20.9 19.5 18.5 17.9 15.7 13.5 50.9 11.6 11.8 11.8 30.7 35.4 4.8 3.3 2.7 1.3 0.6 0.6 1H03 2H03 1H04 2H04 1H05 Register Main Corp Actions Stakeholder Employee Share Document Mutual F
Slide 60: Canada Half Year Comparison
Canada Half Year Comparison Financial Results CADm CADm Total Revenue Revenue Breakdown 54.7 70.0 50.6 68.8 63.1 46.6 62.9 56.8 9.5 8.1 6.0 5.4 4.3 4.8 2.1 1.0 0.2 0.3 0.2 0.6 1H03 2H03 1H04 2H04 1H05 Register Maintenance Corporate Actions Stakeholder Employee Share Document Services Relationship Pl