Computershare Limited · ASX:CPU
Computershare — FY2016 Earnings Presentation
53 slides from Computershare's earnings presentation, Aug 10, 2016
Slide 1: Positioning for sustained earnings growth: 2016 Full Year Results
COMPUTERSHARE LIMITED Positioning for sustained earnings growth 2016 Full Year Results Presentation Stuart Irving Chief Executive Officer and President Mark Davis Chief Financial Officer 10 August 2016
Slide 2: Robust underlying business performance continues
Robust underlying business performance continues Management EBITDA excluding both margin income and the impact of exchange rate movements has grown 46.1% since FY13 400 35% 379.3 350 364.4 30% 327.2 300 25% 250 259.7 EBITDA Margin USD million 21.4% 20% 20.8% 200 19.6% 16.4% 15% 150 10% 100 5% 50 0 0
Slide 3: Overview: Positioning for sustained earnings growth
Overview: Positioning for sustained earnings growth › FY16: Resilient performance - Total management revenue $2,074.7m, +5.0% 1 - Management EBITDA $557.1m, +0.5% (26.9% margin) and Management EBITDA excluding margin income $394.4m, +4.3% 1 - Management EPS 55.09 cents, -7.9%, in line with guidance
Slide 4: FY17 outlook
FY17 outlook Guidance › In constant currency, Computershare expects FY17 Management EPS to be slightly up on FY16 with a further update to be provided at the AGM Assumptions › This outlook assumes that equity markets remain at current levels and interest rate markets perform broadly in line with cur
Slide 5: Contents
Contents Section Title Page 1 Company overview 6 2 Financial performance 7 3 Operating review 11 4 Strategies and Execution 22 5 Conclusion 25 6 Appendices 26 5
Slide 6: Company overview
Company overview A leading global provider of administration services in our selected markets Who we are › Global market leader in transfer agency and share registration, employee equity plan administration, proxy solicitation and stakeholder communications › Also specialise in mortgage servicing, c
Slide 7: FY16 Computershare - at a glance
FY16 Computershare - at a glance Management revenue @ CC Management EBITDA @ CC Canada Canada ANZ ANZ 9% 14% 8% Asia 15% By geography 8% Asia 6% $2,074.7m $557.1m UCIA UCIA 22% USA 19% 47% USA CEU CEU 45% 3% 4% Communication Services Technology & other Communication Services Technology & other 9% 2%
Slide 8: Results summary
Results summary Comparison in constant currency FY16 @ CC 1 FY15 Actual CC Variance FY16 Actual Total Management Revenue $2,074.7 $1,976.1 Up 5.0% $1,974.2 Operating Costs $1,516.3 $1,419.7 Up 6.8% $1,440.2 Management EBITDA $557.1 $554.1 Up 0.5% $532.6 EBITDA Margin % 26.9% 28.0% Down 110bps 27.0%
Slide 9: FY16 management NPAT analysis
FY16 management NPAT analysis Underlying resilience of operating business Controllable External 360 350 16.1 340 5.6 6.0 0.8 330 332.7 USD million 13.0 320 8.1 315.3 310 11.7 303.5 300 290 280 FY15 Mgt EBITDA Interest Dep'n & NCI MI Tax FY16 NPAT FX FY16 NPAT NPAT (ex MI) Amort @ CC 9 Constant curre
Slide 10: Management EPS – AUD equivalent
Management EPS – AUD equivalent › For Australian investors, AUD equivalent EPS remains key and the weaker AUD has driven an increase in this metric over recent years › From FY13 to FY16, in AUD EPS terms, CPU produced 42.2% growth with a CAGR of 12.4% Management EPS (AUD) 1.0297 120 0.9139 100 0.838
Slide 11: Management revenue breakdown
Management revenue breakdown Comparison in constant currency Revenue stream FY16 @ CC FY15 Actual CC Variance FY16 Actual Register Maintenance $764.1 $798.9 Down 4.4% $727.8 Corporate Actions $147.5 $144.2 Up 2.3% $140.5 Business Services $629.3 $519.1 Up 21.2% $605.7 Employee Share Plans $234.3 $24
Slide 12: Management revenue bridge
USD million 12 1,850 1,900 1,950 2,000 2,050 2,100 FY15 Total Mgt Revenue 1,976.1 Register 32.1 Maintenance Russian disposal business $20.0m Corporate 2.7 Actions Business Services 117.6 Stakeholder 13.0 Relationship Mgt Management revenue bridge Employee 5% revenue growth (pre FX impact) 9.8 Share
Slide 13: Client balances and margin income
Client balances and margin income Continued growth in balances 18 16 15.7 Effective hedging - natural 8% 15.2 15.2 ($1.2bn) 14 14.2 Pre-hedged exposure 12 Effective hedging - derivative / fixed rate 26% Client Balances ($4.1bn) USD billion 10 224.9 8 192.6 Exposure to interest rates 30% ($4.7bn) 175
Slide 14: Client balances: strong leverage to rising rates
Client balances Assuming an Strong leverage to rising rates increase of 100bps on our FY16 3.00% exposed balances ($4.7bn) CPU would generate an 2.50% additional $47m annualised EBITDA 2.00% 1.50% 1.00% 0.50% 0.00% Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 J
Slide 15: EBITDA by business stream
EBITDA by business stream Comparison in constant currency FY16 @ CC FY15 CC Variance FY16 FY16 Actual Actual Actual EBITDA Margin % Register Maintenance & Corporate Actions $277.5 $270.5 Up 2.6% $266.0 30.6% Business Services $153.6 $134.9 Up 13.9% $145.3 24.0% Employee Share Plans $58.9 $74.4 Down
Slide 16: Operating costs analysis
Operating costs analysis Costs in line with expectations with new initiatives underway › As highlighted in FY16 guidance in August 2015, costs are up as expected › Operating cost increases of 6.8% are driven by: - BAU OPEX up 1.8%, more than half made up on non recurring items - net acquisitions and
Slide 17: Operating costs bridge
Operating costs bridge BAU OPEX including non recurring items up 1.8% 1,540 1,520 76.1 1,516.3 1,500 1,480 USD million 1,460 52.3 1,440 18.0 1,440.2 1,420 1,419.7 26.3 1,400 1,380 1,360 Acquisitions net (including non Cost associated FX FY15 Operating FY16 Operating FY16 Operating related activity w
Slide 18: Structural cost review commenced
Structural cost review commenced Group wide cost review a key priority › External consultants appointed to review: - Process automation - Supplier costs - Productivity; and - Business simplification measures Louisville update – net benefits upgraded Prior estimate Current Actual % Future estimate %
Slide 19: Cash flows
Cash flows Strong cash flows fund growth and return strategies FY16 Actual FY15 Actual Net operating receipts and payments $480.2 $523.8 Net interest and dividends ($50.5) ($47.7) Income taxes paid ($57.0) ($59.5) Loan servicing advances (net) ($68.1) ($44.5) Statutory operating cash flows $304.6 $3
Slide 20: Balance sheet
Balance sheet Optimising the balance sheet to enhance future returns Jun 16 Jun 15 Variance Current Assets $1,315.2 $1,227.8 Up 7.1% › Goodwill and intangible assets increased Non-Current Assets $2,662.6 $2,573.6 Up 3.5% due to acquisitions and MSR additions. Total Assets $3,977.7 $3,801.5 Up 4.6% ›
Slide 21: Capital management
Capital management A sign of confidence in our business and future Share buy-back › The Company announced on 18 August 2015 an on-market buy-back having an aggregate value of up to AUD 140 million › As at 30 June 2016, the Company had acquired 9,377,069 ordinary shares for a total consideration of A
Slide 22: Strategies and Execution
Strategies and Execution Aims and Strategy FY16 Scorecard FY17 Priorities US Registries Maintain underlying business › 73% of the Dow, 60% of the S&P 500, › Maintain market share and profitability and free cashflows 55% of Fortune 500 external / internal quality scores 1. Preserve market leading sha
Slide 23: Strategies and Execution
Strategies and Execution Aims and Strategy FY16 Scorecard FY17 Priorities UK Mortgage Build the leading UK mortgage UKAR appointment - servicing GBP 30bn book › Execute UKAR business and servicing business while delivering with an additional GBP 11bn of assets technology integration Servicing synerg
Slide 24: Hot Topics
Hot Topics Blockchain Computershare has a measured and considered approach to Blockchain. In the near to medium term, we will continue to pursue a dual track approach in terms of assessing the commercial value of introducing innovative blockchain services in market adjacencies, while also rigorously
Slide 25: Conclusions
Conclusions › Resilient FY16 performance with Management EPS in line with guidance - Total management revenue up 5.0% 1 - Management EBITDA excluding margin income up 4.3% 1 › Continued track record of robust underlying profitability - Management EBITDA excluding both margin income and the impact of
Slide 26: Appendices
APPENDICES Statutory results Financial performance by half year at actual rates Global Registry Maintenance and Plan Managers Management revenue by region Technology costs CAPEX versus depreciation Client balances Debt facility maturity profile Key financial ratios Effective tax rate Dividend histor
Slide 27: Statutory results
Statutory results FY16 FY15 Vs FY15 Earnings per share (post NCI) 28.55 cents 27.61 cents Up 3.4% › Management results are used, along with other measures, to assess operating business Total Revenues $1,988.9m $1,984.0m Up 0.2% performance. The Company believes that exclusion of certain items permit
Slide 28: Management adjustment items
Management adjustment items Appendix 4E Note 3 Management adjustment items net of tax for the year ended 30 June 2016 were as follows: Amortisation › Customer contracts and other intangible assets that are recognised on business combinations or major asset acquisitions are amortised over their usefu
Slide 29: Financial performance by half year at actual rates
Financial performance by half year at actual rates 2H16 1H16 2H15 1H15 2H14 1H14 2H13 1H13 Total Management Revenue $1,035.5 $938.7 $1,016.5 $959.5 $1,045.7 $976.9 $1,037.5 $987.6 Operating Costs $744.5 $695.7 $720.7 $699.0 $771.7 $709.2 $767.6 $747.6 Management EBITDA $290.3 $242.3 $294.8 $259.3 $2
Slide 30: Global Registry maintenance and Plan Managers revenue
Global Registry maintenance and Plan Managers revenue Registry Maintenance @ CC Plan Managers @ CC Other Rev 8% Holder/Broker MI paid Issuer Paid 14% 27% Fee 70% 45% FY15 $798.9m $247.6m Margin Income 3% TX 33% Oth Rev 9% Holder/Broker MI paid 13% FY16 @ CC 28% Issuer paid 69% Fee $764.1m $234.3m 49
Slide 31: Management revenue & EBITDA: Regional Analysis
Management revenue & EBITDA Regional Analysis REVENUE BY REGION EBITDA BY REGION 2,500 600 554.1 540.6 532.6 2,022.6 88.0 1,976.1 1,974.2 500 87.1 70.2 2,000 189.5 185.9 165.6 400 USD millions USD million 1,500 212.2 229.8 905.9 251.8 881.7 965.3 300 1,000 15.0 23.5 107.3 113.1 14.0 200 81.2 327.9 1
Slide 32: FY16 Management revenue: Regional Analysis
FY16 Management revenue Regional Analysis 378.0 400 337.4 350 300 250 USD million 200 150.5 150 104.7 97.5 95.5 89.8 78.0 100 63.6 61.6 61.1 59.6 55.0 38.1 36.0 31.8 24.4 50 23.5 20.0 18.9 18.5 17.9 17.3 15.0 14.0 11.3 9.6 8.0 7.0 6.0 5.7 5.6 4.2 2.4 2.3 1.8 1.6 0.6 0.1 0.0 0.0 0.0 0 Register Corpor
Slide 33: Australia
Australia Management revenue: AUD million FY14 FY15 FY16 399.8m 357.3m 362.0m 144.0 140.8 132.2 121.3 121.2 123.3 72.8 41.4 32.8 34.6 33.5 29.0 26.0 22.3 19.3 10.8 2.0 2.1 4.2 3.8 1.9 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions Services Relat
Slide 34: Hong Kong
Hong Kong Management revenue: HKD million FY14 FY15 FY16 512.3m 575.4m 597.0m 384.3 367.1 339.2 118.1 96.6 99.3 92.6 76.1 67.4 16.5 18.6 9.1 Register Maintenance Corporate Actions Stakeholder Relationship Mgt Employee Share Plans 34 FY14 FY15 FY16
Slide 35: India
India Management revenue: INR million FY14 FY15 FY16 2,426.6m 2,661.1m 2,793.4m 2,100.3 1,911.9 1,618.8 662.9 628.9 592.7 178.9 86.4 100.4 Register Maintenance Corporate Actions Business Services 35 FY14 FY15 FY16
Slide 36: United States
United States Management revenue: USD million FY14 FY15 FY16 905.9m 881.7m 965.3m 222.0m 406.5 402.3 Mortgage Services 378.0 337.4 262.4 256.0 78.0 73.9 68.8 69.2 62.5 63.6 51.9 55.0 45.0 31.5 35.0 38.1 10.7 12.3 15.0 Register Corporate Business Stakeholder Employee Share Communication Tech & Other
Slide 37: Canada
Canada Management revenue: CAD million FY14 FY15 FY16 202.9m 216.8m 218.9m 82.2 81.5 79.0 78.8 79.2 79.9 23.9 23.7 25.0 20.8 17.8 17.7 6.5 7.4 5.4 2.9 2.9 2.4 0.8 0.7 0.0 Register Corporate Business Stakeholder Employee Share Communication Tech & Other Maintenance Actions Services Relationship Mgt P
Slide 38: United Kingdom and Channel Islands
United Kingdom and Channel Islands Management revenue: GBP million FY14 FY15 FY16 176.4m 203.6m 221.3m 62.7m Mortgage Services 101.1 81.0 79.6 64.6 57.3 46.3 44.6 41.8 35.5 8.2 6.9 5.2 4.2 4.4 4.0 2.0 3.4 3.3 2.9 3.4 1.8 Register Corporate Business Stakeholder Employee Share Communication Tech & Oth
Slide 39: South Africa
South Africa Management revenue: RAND million FY14 FY15 FY16 279.8m 244.3m 245.4m 255.2 220.6 217.3 12.2 14.6 15.5 15.1 9.5 7.2 0.5 1.1 0.7 Register Maintenance Corporate Actions Stakeholder Relationship Mgt Employee Share Plans 39 FY14 FY15 FY16
Slide 40: Germany
Germany Management revenue: EUR million FY14 FY15 FY16 43.2m 38.6m 36.6m 18.1 17.8 17.8 16.1 15.3 14.7 3.1 2.6 2.7 1.2 1.4 1.3 0.9 0.1 0.3 Register Maintenance Corporate Actions Employee Share Plans Communication Services Tech & Other Revenue 40 FY14 FY15 FY16
Slide 41: Technology costs
Technology costs 300 11.9% 11.9% 12.0% 12% 250 240.9 236.4 236.0 13.9 12.7 10% 14.2 200 61.8 62.5 65.7 8% Tech costs as a % of revenue 150 USD million 6% 91.1 79.0 81.1 100 4% 50 2% 74.1 80.4 76.9 0 0% FY14 FY15 FY16 Development Infrastructure Maintenance Admin Technology costs as a % of revenue 41
Slide 42: Capital expenditure versus depreciation
Capital expenditure versus depreciation 50 45 40 38.6 2.2 35 8.7 29.9 30 2.5 2.1 25 USD million 8.1 19.8 20 1.0 2.8 2.5 15 3.5 25.6 10 16.8 12.5 5 0 FY14 FY15 FY16 Information Technology Communication Services Facilities Occupancy Other Depreciation 42
Slide 43: FY16 client balances: Interest rate exposure
FY16 client balances Interest rate exposure Average funds held during FY16 › CPU had an average of USD 15.7bn of client funds under management during FY16. › For 36% (USD 5.7bn) of the FY16 average Exposure to client funds under management, CPU had no interest rates exposure to interest rate movemen
Slide 44: FY16 client balances: Exposed funds by currency
FY16 client balances Exposed funds by currency (FY16 average balances) Average exposed funds Average exposed funds balance prior to hedging balance net of hedging Other AUD 5% Other AUD 2% CAD 8% 5% 12% CAD 17% USD USD 9.9bn USD 4.6bn 45% (USD 15.7bn x 64%) USD (USD 15.7bn x 30%) 41% GBP 36% GBP 29%
Slide 45: Client balances: Fixed and floating rate term deposits
Client balances Fixed and floating rate term deposits 7,000 Floating Rate Deposits Fixed Rate Deposits 6,000 5,000 4,000 USD million 3,000 2,000 1,000 0 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Fixed rate derivatives 1,200 Derivatives 1,000 800 USD million 600 400 200 0 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20
Slide 46: Debt facility maturity profile
Debt facility maturity profile Maturity Dates Debt Committed Bank Private SLS USD million Drawn Debt Debt Placement Advance Facilities Facility Facility Facility FY17 Dec-16 116.3 150.0 150.0 Dec-16 91.9 175.0 175.0 Mar-17 21.0 21.0 21.0 FY18 Jul-17 449.6 450.0 450.0 Feb-18 40.0 40.0 40.0 FY19 Jul-1
Slide 47: Key financial ratios
Key financial ratios Jun 16 Jun 15 Variance USD m USD m Jun 16 to Jun 15 Interest Bearing Liabilities $1,863.3 $1,769.1 5.3% Less Cash ($526.6) ($604.1)* (12.8%) Net Debt $1,336.7 $1,165.0 14.7% Management EBITDA $532.6 $554.1 (3.9%) Net Financial Indebtedness to EBITDA 2.51 times 2.10 times Up 0.41
Slide 48: Effective tax rate
Effective tax rate Statutory and management Tax rate % 40% 35.3% 35% 34.0% › The increase in the Group’s management effective tax rate 30% 27.9% from 26.1% to 27.9% is driven 26.1% by a range of factors including 25% 22.4% profit mix, non-creditable 21.8% withholding tax, writing off 20% expiring lo
Slide 49: Dividend history and franking
Dividend history and franking New policy to maximise franking distribution 20.0 100% 18.0 90% 16.0 17 80% 16 16 14.0 15 15 70% 14 12.0 60% 10.0 50% AU cents 8.0 40% 6.0 30% 4.0 20% 2.0 10% 0.0 0% 1H14 2H14 1H15 2H15 1H16 2H16 Dividend (AU cents) Franking (%) 49
Slide 50: SLS (US mortgage servicing) cash flows
SLS (US mortgage servicing) cash flows Cash flows have different statutory classifications and can fall across different reporting periods FY16 FY15 Notes Actual Actual Loan Servicing Advances (net) ($68.1) ($44.5) Operating cash flow (outflow)/inflow > Loan servicing advances are a working capital
Slide 51: US and UK Mortgage Servicing - UPB and number of loans
US and UK Mortgage Servicing - UPB and number of loans Performing Non-performing US Mortgage Servicing At 30 Jun 16 At 30 Jun 15 At 30 Jun 16 At 30 Jun 15 Fully-Owned $4.9BN $5.0BN $8.8BN $8.1BN MSRs 1 24K Loans 21K Loans 92K Loans 97K Loans Excess strip deals No excess strip SPV deals SPV deals Par
Slide 52: Exchange rates
Exchange rates › Average exchange rates used to translate profit and loss to US dollars Currency FY16 FY15 FY14 FY13 FY12 USD 1.00000 1.00000 1.00000 1.00000 1.00000 AUD 1.37490 1.19208 1.0942 0.9712 0.9608 HKD 7.75858 7.75359 7.7561 7.7561 7.7739 NZD 1.50166 1.28103 1.2176 1.2180 1.2347 INR 66.2863
Slide 53: Important notice
Important notice Forward-looking statements › This announcement may include 'forward-looking statements'. Such statements can generally be identified by the use of words such as 'may', 'will', 'expect', 'intend', 'plan', 'estimate', 'anticipate', 'believe', 'continue', 'objectives', 'outlook', 'guid