1 Market Overview and Financial Results Tom Honan Chief Financial - - PowerPoint PPT Presentation

1

Interim Results 2003 Presentation 6 March 2003

2

Market Overview and Financial Results

Tom Honan Chief Financial Officer

3

Summary of results

Normalised EPS – 0.8 cents EBITDA in line with forecast at $54.9 m Generated operating cash flows of $33.1 m Capital Expenditure of $11.5 m, 60% down on prior year Share Buy-Back - 18.7 m shares acquired Interim ordinary share dividend 2.5 cents, fully franked Net Debt - $74 m, Funding Capacity of A$250 m

4

Context of the Results

1H normalised EBITDA in line with forecast Revenues impacted by slow down in corporate actions activity and low interest rates Continued operating cost savings, but not as rapid as revenue declines Technology spend declines Capital expenditure down 60% Changed composition of Board – increased Non-Executive Directors

5

This presentation is structured around the following framework

Market Overview Financial Results CEO’s Report

6

Market Overview

CPU Revenues are driven by multiple factors

Revenue type

62% 6% 8% 22% 2%

Register Maint. & Recoveries Corporate Actions Margin Income Non Registry Other

Retain existing clients, win market share Growth in clients and holders Register Maint. & Recoveries Win new business; link to key stakeholders, clients Market conditions, M&A activity Corporate Actions Hedging, flow on effort from Maintenance & Corp Actions Interest rates, hedging balances Margin Income Increase proportion

• n non-registry

business Growth in non- registry businesses Non- Registry Risk mitigation Driver Revenue

7

Market Overview

Global Equities Market

Historical Equity Issuance Data

0.0 500,000.0 1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0 1H92 2H92 1H93 2H93 1H94 2H94 1H95 2H95 1H96 2H96 1H97 2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01 1H02 2H02 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 M&A Value of Transactions (US$m) (LHS) M&A Number of Transactions (RHS)

M&A Value of Transactions (US$m) M&A Number of Transactions

Source: Thomson Financial

8

Market Overview

Global Interest Rate Market

US

2 4 6 8 1996 1997 1998 1999 2000 2001 2002 2003 %

UK

2 4 6 8 1996 1997 1998 1999 2000 2001 2002 2003 %

Canada

2 4 6 8 1996 1997 1998 1999 2000 2001 2002 2003 %

9

Market Overview Financial Results CEO’s Report

10

Financial Results

Group Financial Performance A$m’s

Revenue 1H’02 2H’02 1H’03 Registry maintenance 177.4 169.5 168.0 Corporate actions 34.8 22.8 21.8 Margin income (including sharesave admin) 41.9 30.6 28.1 Non Registry fees/sales 77.4 76.1 75.2 Recoveries 59.5 65.3 49.3 Interest income 2.5 1.7 1.8 Other 3.0 18.5 4.5 Total Revenue 396.5 384.5 348.7 Operating costs 323.5 309.9 293.8 EBITDA 73.0 74.6 54.9 Expenses Depreciation and amortisation 11.7 13.6 15.4 Amortisation of goodwill 15.0 14.9 16.2 Borrowing costs 6.9 3.3 3.8 Other 0.0 (1.5) (1.4) Non-recurring items 0.0 0.0 7.1 Pre tax Profit 39.4 44.3 13.9 Income tax 15.2 10.8 9.0 NPAT before OEI 24.2 33.6 4.8 NPAT after OEI 24.5 46.8 3.9 Normalised NPAT after OEI 24.5 33.4 13.2

11

Financial Results

Half Year Comparison

Revenue Breakdown

77.4 76.1 75.2 177.4 34.8 41.9 22.8 30.6 169.5 168.0 21.8 28.1 Register Main Corp Actions Margin Income Non Registry Sales/Fees A$m

1H'02 2H'02 1H'03

339.6 414.7 396.5 384.5 348.7 71.9 79.7 73.0 74.6 54.9

1H'01 2H'01 1H'02 2H'02 1H'03

A$m

Revenue EBITDA

12

Financial Results

Revenue Analysis

Revenue Breakdown

51.6 0.7 25.8 13.7 21.4 59.4 28.0 9.0 20.7 6.8 57.0 15.3 13.3 6.0 13.7

Register Main Corp Actions Margin Income Recoveries Non Registry Sales/Fees

A$m

Asia Pacific Europe North America

Total Revenue

32% 33% 35%

Asia Pacific Europe North America

13

Financial Results

Cost Analysis

Operating Costs

335.0 323.5 309.9 293.8 267.7

A$m

1H'01 2H'01 1H'02 2H'02 1H'03

Operating Cost Breakdown

61.2 149.6 23.0 44.9 5.9 64.8 15.7 41.0 10.7 49.7 18.0 40.6 8.6 38.9 36.7 141.0 40.4 136.5

Recov Exp Personnel Occupancy Other Direct Technology Corporate

A$m

1H'02 2H'02 1H'03

14

Financial Results

EBITDA generated from diversified portfolio

Total EBITDA

71.9 79.7 73.0 74.6 54.9

1H'01 2H'01 1H'02 2H'02 1H'03 A$m

EBITDA Breakdown 1H'03

45% 37% 18% Asia Pacific Europe North America

15

Financial Results

Analysis of NPAT

Explanation

• Normalised NPAT for 1H’03

was $13.2m

18.3 20.4 24.5 33.4 3.9 16.2 4.6 2.5 4.7

10 20 30 40 1H'01 2H'01 1H'02 2H'02 1H'03

A$m

Tax losses written off Non-Recurring Actual NPAT

Note: Actual NPAT + Non-Recurring + Tax losses written off = Normalised NPAT

16

Financial Results

Effective Tax Rate

Headline effective tax rate 1H03 65.2% (1H02 38.6%) Normalised headline effective tax rate 1H03 30.3% (1H02 32.3%) Headline rate adversely affected by benefit of losses not brought to account $4.7 m (1H02 $2.5 m) Underlying effective tax rate 1H03 10.6% (1H02 26.5%) Trend in regard to both normalised headline and underlying effective tax rate is lower

17

Financial Results

Headcount

Total FTE's

2,053 2,591 4,300 4,966 5,321 5,165

1,000 2,000 3,000 4,000 5,000

June '98 June '99 June '00 June '01 June '02 Dec '02

18

Financial Results

Headcount *

Geographic Breakdown

894 154 77 1,183 74 655 548 1,038 200 400 600 800 1,000 1,200 Australia Hong Kong

• N. Zealand

UK Ireland

• S. Africa

US Canada

* Headcount excludes Technology and Corporate Services

Gross reduction of 296 FTE’s Redundancy programs in Australia, UK and Canada Headcount increases in high growth businesses (i.e. Non Registry)

19

Financial Results

Technology Costs – Establishing Global Platform

38.9 41.0 40.4 10 20 30 40 50 1H'02 2H'02 1H'03

All A$m – internal cash costs only All technology costs are expensed Major events: SCRIP implementation: US, Canada and Hong Kong Global Options system development (including BP)

20

Financial Results

Analysis of Technology Costs

Cost Type

Occupancy 3% External bureau 17% Comms 4% Personnel &

• n-costs

67% Computer Costs 9%

Category

Infrastructure 18% External bureau 17% Maintenance 21% Development 36% Admin 8%

21

Analysis of Technology Costs

17.0 18.5 17.8 1.8 1.0 3.7 11.9 15.3 10.3 8.2 6.2 8.6 15.8 11.0 8.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0

1H'02 2H'02 1H'03

A$m External Bureau Infrastructure Maintenance Application Maintenance Administration Development

54.7 52.0 48.4

Financial Results

22

Financial Results

Balance Sheet Strength

Net Debt / Equity = 11.8% Net Debt = A$ 74m Committed Debt facility = A$ 250m Net Debt / Equity has increased as a result of the share buy-back and increased dividends

23

Financial Results

Cash Flow

Gearing on a net debt to equity basis – 11.8% Committed resources A$250m Debtors days

• utstanding have fallen

from 70 to 69 days

27.1 41.2 51.6 33.1 27.8 11.5 28.4 28.5 23.4 19.9

0.0 10.0 20.0 30.0 40.0 50.0 60.0

1H'01 2H'01 1H'02 2H'02 1H'03

A$m

Cashflow from Ops Cap Ex - PPE

24

Financial Results

Capital Expenditure down 60% from Dec ‘01

Occupancy 2.0 Document Services Facilities 0.1 Information Technology 8.8 Other 0.6 TOTAL 11.5 CPU Group Capex A$ M

25

Financial Results

Working Capital Management Improving but not enough

70 69 33 33 31 75

10 20 30 40 50 60 70 80 FY'01 FY'02 1H'03

days

Receivable days Payable days

8% reduction in trade receivable balances

26

Financial Results

Margin Income – Interest Rate Sensitivity

Margin Income Exposure

• 60
• 40
• 20

20 40 60 80 100

• 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% A$m PBT Impact

Exposure Hedged exposure 100% Hedged

27

Financial Results

Risk Management - Funds Balances at 31 December 2002

By Category

Plans 21% Broker Trust 23% Corporate Actions 17% Dissenter 11% Dividend 15% Regular Trust 13%

By Country

Canada 42% UK 45% US 12% Australia 1% CY02 average balance range A$3.1b – A$4.5b

28

Financial Results

Risk Management - Interest Rate Sensitivity

Exposure to interest rates 30% Effective hedging in place - both natural & synthetic 36% No exposure 34%

Interest Rate Hedging

Strategy:

• Minimise downside risk in current low interest rate

environment Policy:

• Minimum hedge of 25% / Maximum hedge of 75%
• Minimum term 1 year / Maximum term 5 years
• Current hedging: 36%

29

Financial Results

Equity Management – Fully Franked Interim Dividend of 2.5 cps

• EPS – Normalised

0.8 cents

• Dividend

5 cents per year

• Current yield *

2.9%

• Franking Benefit – Total return

4.1%

* Based on share price of A$ 1.70

30

Financial Results

Equity Management – Share Buy Back

Commenced 11th September 2002 Acquired 18,710,000 shares Average price A$2.05 Scheduled to complete 11th March 2003

31

Financial Results

Financial Summary

Result in context of poor market conditions Further challenges ahead for full year Work on efficiency gains and new client wins will flow through 2H Capital management initiatives progressing Integration of financial systems and processes largely complete

32

Financial Results

Full year guidance

“Looking ahead in these uncertain times we are able to forecast and control our operating costs but it is difficult to be certain of revenues. At present the company expects to achieve EBITDA results for the full year (excluding non-recurring items) that are in line with market expectations (ranging from $128 million to $145 million).”

33

CEO’s Report

Chris Morris Chief Executive Officer

34

Market Overview Financial Performance CEO’s Report

35

CEO’s Report

Managing our business through the cycle

Financial Management Program – Cost control – Capital Management (Capex) – Timely Reporting

36

CEO’s Report

Managing our business through the cycle

Technology – the key to our future – Workflow – Data Storage Systems (DSS) – COSMOS Options – Global Portal – USA and Canada completed

37

CEO’s Report

Managing our business through the cycle

Markets Technology – Restructured division with separate P&L – EFA – Supplier of software to over 30 exchanges

38

CEO’s Report

Managing our business through the cycle

Service Quality

• Australia significant lift in service standards
• North America top in recent surveys
• Continued focus in all regions

39

CEO’s Report

Managing our business through the cycle

People – Accountability – Hiring Quality People – Graduate Program

40

CEO’s Report

Managing our business through the cycle

Winning and Retaining Business – BHP Billiton (Aus, SA, UK) – Fosters – David Jones – TAB Ltd – Promina Group (Royal & Sun Alliance) At what margins? – Whitbread (UK) – PNC (USA) – Bank of China (HK) – China Telecom (HK)

41

CEO’s Report

Managing our business through the cycle

The current business environment is creating new opportunities Short-term issues are important but we will not mortgage our future with a single focus on short-term gains.

42

Appendix A Revenue Breakdown by Country

43

Competitive Environment

2,414 384 562 162 682 419 280 1,229 Clients CIBC Mellon BoNY, DST, Mellon Lloyds, Capita APRL Competitors Canada USA South Africa Ireland UK Hong Kong New Zealand Australia

44

Australia - Half Year Comparison

Revenue Breakdown

36.4 0.9 16.4 25.5 12.3 18.3 2.5 17.0 1.0 7.9 35.2 1.1 6.0 36.2 25.8 0.5 4.5 35.2 Register Main Corp Actions Margin Income Recoveries Non Registry Other

A$m

1H'02 2H'02 1H'03

Total Revenue

86.8 85.7 91.5 97.5 98.4 1H'01 2H'01 1H'02 2H'02 1H'03

A$m

45

New Zealand - Half Year Comparison

Revenue Breakdown

2.1 0.4 1.6 0.4 2.4 0.8 3.8 1.2 4.0 0.1 0.9 4.2 Register Main Corp Actions Margin Income Recoveries Other

A$m

1H'02 2H'02 1H'03

Total Revenue

7.6 5.2 5.1 7.2 7.1 1H'01 2H'01 1H'02 2H'02 1H'03

A$m

46

Hong Kong - Half Year Comparison

Total Revenue

13.2 15.9 13.0 8.9 2H'01 1H'02 2H'02 1H'03

A$m

Revenue Breakdown

1.7 3.0 10.0 2.3 9.2 3.6 12.3 Register Main Corp Actions Margin Income Recoveries Other

A$m

1H'02 2H'02 1H'03

47

United Kingdom - Half Year Comparison

Revenue Breakdown

9.9 2.0 17.0 14.6 3.2 13.3 21.4 1.6 16.0 22.8 11.0 42.3 17.6 5.2 39.8 12.6 6.0 40.6 Register Main Corp Actions Margin Income Recoveries Non Registry Other

A$m

1H'02 2H'02 1H'03

Total Revenue

95.5 110.9 115.2 97.4 104.0 1H'01 2H'01 1H'02 2H'02 1H'03

A$m

48

Ireland - Half Year Comparison

Revenue Breakdown

1.9 0.9 1.1 0.1 0.1 2.8 3.3 0.2 4.8 0.4 0.2 3.1 Register Main Corp Actions Margin Income Recoveries Other

A$m

1H'02 2H'02 1H'03

Total Revenue

4.9 4.1 6.8 5.9 8.1 1H'01 2H'01 1H'02 2H'02 1H'03

A$m

49

South Africa - Half Year Comparison

Revenue Breakdown

0.2 0.9 0.4 9.5 1.2 10.1 0.7 0.6 13.3 Register Main Corp Actions Margin Income Recoveries

A$m

1H'02 2H'02 1H'03

Total Revenue

15.5 12.9 12.7 11.5 9.9 1H'01 2H'01 1H'02 2H'02 1H'03

A$m

50

United States - Half Year Comparison

Revenue Breakdown

10.9 26.4 15.7 22.5 1.1 7.0 0.1 4.6 2.2 30.6 4.2 4.6 24.3 23.0 3.0 2.0 20.4 Register Main Corp Actions Margin Income Recoveries Non Registry Other

A$m

1H'02 2H'02 1H'03

Total Revenue

55.5 51.9 79.1 72.4 74.7 1H'01 2H'01 1H'02 2H'02 1H'03

A$m

51

Canada - Half Year Comparison

Revenue Breakdown

11.6 4.7 0.1 13.5 13.5 0.1 6.2 5.0 0.3 13.4 6.7 42.7 6.5 3.3 41.3 10.7 4.0 39.0 Register Main Corp Actions Margin Income Recoveries Non Registry Other

A$m

1H'02 2H'02 1H'03

Total Revenue

65.2 66.0 94.3 78.2 79.2 1H'01 2H'01 1H'02 2H'02 1H'03

A$m