Annual General Meeting Michael Kay October 2010 Financial - - PowerPoint PPT Presentation

Presentation by McMillan Shakespeare Limited

Annual General Meeting

October 2010

Michael Kay

Financial Performance

FY09 FY10 % increase

• ver prior

year $000 $000 Revenue from operating activities 77,259 131,021 69.6% Profit before tax and acquisition profit 28,912 39,904 38.0% NPAT before acquisition profit 20,523 27,905 36.0% After tax profit arising from acquisition

• 17,055
• P 1

October 2010

NPAT 20,523 44,960 119.1% Basic EPS (cents) 30.4 66.5 119.0% Normalised basic EPS (cents) 30.4 41.2 35.8% Dividends declared per share (cents) 19.0 24.0 26.3% Amount franked 100% 100% Normalised ROE (%) 39% 42% 5 year normalised EPS CAGR 39%

Normalised numbers exclude the $17.1m acquisition profit recognised in FY10 as a result of the business combination of ILA.

Historical normalised NPAT(1)

27.9 17.1

20 30 40 $ m

Profit recognised on ILA business combination Normalised NPAT 5-year CAGR of 39.9%

P 2

September2010 Note 1: Normalised numbers exclude the $17.1m acquisition profit recognised in FY10 as a result of the business combination of ILA

5.2 11.3 13.2 17.4 20.5

10 20 FY05 FY06 FY07 FY08 FY09 FY10

NPAT (continuing operations) Acquisition Gain

NPAT bridge FY09 to FY10

($m)

Growth 36% 45.0 4.7 3.3 17.1 (0.6) 25 30 35 40 45 50 Growth 23% Represents NPAT since acquisition (1 April10)

P 3

October 2010

20.5 27.9 45.0 4.7 5 10 15 20 NPAT FY09 Remuneration Services Growth ILA Acquistion funding costs (parent co.) Normalised NPAT FY10 Aquisition Gain NPAT FY10

Historical Key Financial Performance Measures

25.0 30.0 35.0 40.0 45.0 50.0 cents

Normalised earnings per share (EPS) (1)

EPS 5-year CAGR of 39.0%

15 20 25 30 cents

Total dividends per share P 4

October 2010

0.0 5.0 10.0 15.0 20.0 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 ce

Basic EPS Cash EPS

5 10 15 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 cen Note 1: Normalised EPS excludes the profit recognised on acquisition as a result of the business combination of ILA

Remuneration Services segment highlights

Revenue growth 21% on PCP. NPAT growth(1) 23% on PCP. Core operating contribution(2) increase of 38.8% over PCP. Customer metrics exceeding our benchmarks.

P 5

October 2010

Customer metrics exceeding our benchmarks. Ongoing productivity improvements. FY2011 year to date performance in line with expectations.

Note 1: To provide a meaningful NPAT comparison to FY09 NPAT, growth includes interest on surplus cash but excludes any interest on funds borrowed to acquire ILA. Note 2: Core operating contribution - profit before finance, tax and depreciation as a percentage of revenue derived directly from salary packages managed and novated leasing.

Remuneration Services financial performance

FY10 FY09 % Comment $000 $000 Inc Segment revenue 92,139 76,000 21% Operating expenses Employee and director benefits expenses 39,282 34,309 14% Significantly below revenue growth Depn and amort of PPE and software 2,222 1,436 55% Investment in IT, CRM, BCP/DRP and new premises Amortisation of contracts acquired 1,084 386 181% Increase due to $5.2m contract rights payments in FY09 Impairment of goodwill

• 36

Technology and communication expenses 3,172 3,163 0% Maintained at FY09 level Property and corporate expenses 2,502 2,297 9% Increase reflects additional space and new premises P 6

October 2010

Property and corporate expenses 2,502 2,297 9% Increase reflects additional space and new premises Consulting costs 1,274 1,033 23% Includes Henry review costs Marketing costs 2,550 1,111 130% Launch of Maxxia brand and focus on driving revenue growth Other expenses 4,932 4,576 8% Significantly below revenue growth Total expenses 57,018 48,347 18% Profit before tax from continuing operations 35,121 27,653 27%

Productivity and Customer Satisfaction Indices

Customer Satisfaction Index Productivity Index

150 200 250

MMS Customer Satisfaction Index December 2008 = 100

120 125 130 135 140

• !"#$%&'

P 7

October 2010

Increased head count to maintain client service levels during the end of FBT year process.

50 100

Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10

Rolling 3m

95 100 105 110 115

Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10

Asset Finance segment highlights

Performance for 4QFY10 exceeded “deal” evaluation projections. Satisfactory residual value performance. This has continued in 1QFY11. Strong credit process and performance. Self funding during 4QFY10.

P 8

October 2010

Self funding during 4QFY10. Performance for 1QFY11 in line with expectations.

Asset Finance performance

FY10(1) $000 Revenue from operating activities 38,882 Operating costs Depreciation of motor vehicle fleet 15,989 Interest on fleet financing 2,359

P 9

October 2010

Note 1: The profit represents profits arising since the acquisition of ILA which occurred effective 1 April 2010.

Interest on fleet financing 2,359 Motor vehicle fleet expenses 13,064 Employee and director benefits expenses 2,180 Other expenses 718 Total operating costs 34,309 Profit before tax from continuing operations 4,573

Key Activities FY10

• Solid growth, investing for the future and building

comparative/competitive advantage.

• Heavy participation and investment in the Henry Inquiry into the tax

system; positive Government response with no adverse impact on business.

• Acquisition of Interleasing business at a significant discount to NTA,

P 10 October 2010

• Acquisition of Interleasing business at a significant discount to NTA,

thus strengthening our strategic position, setting the platform for

• ngoing profitable growth and further expansion into financial services.
• All major contracts retained.
• Successful launch of Maxxia operating brand.
• We have commenced business in New Zealand. 18 months in planning.

Key Activities FY10 (cont.)

• Customer service metrics now exceed our benchmarks in all business

units.

• New industrialised IT infrastructure with disaster recovery and “warm

sites” delivered on time and on budget.

• New CRM system delivered on time and on budget.

P 11 October 2010

• New CRM system delivered on time and on budget.
• New telephony system delivered on time and on budget.
• Moved Melbourne office (300 people) on time and under budget.
• Ongoing strengthening of skills and knowledge with Abe Tomas (former

Australian CEO & global CFO of LeasePlan) and Michael Mitrovits (former MD of Interleasing) joining our Executive team.

Our unique market position

Salary Packagers Operating Lessors/ Fleet Managers

Core Skills

Proactive sales culture Retail sales and marketing Budgeting/ BPO processing Tax knowledge base Fringe Benefits Tax administration and reporting Agency model, success based fees High transaction loads

Core Skills

Managing vehicle value chain: procurement, maintenance and disposals (insurance, fuel, tyres, etc.) Fleet management Treasury, financing and RV risk management Wholesale channel

Novated Leases

• Ability to offer clients a “one car” solution (operating, novated and managed leases and Fringe

Benefits Tax management).

• Novated leases require salary packing AND operating lease skill sets because they involve the

purchase and financing of motor vehicles AND Fringe Benefits Tax management and administration.

• Many customers prefer to deal with one supplier.
• Cross selling opportunities.

P 12 October 2010

The combined business – the first 6 months

• Integration running well.
• New value proposition well received by market.
• Complementary cash flow dynamics and capital requirements of the two

business segments are attractive to financiers and provide mitigation against any credit tightening.

• Strong competitive position emerging.

P 13 October 2010

• Strong competitive position emerging.
• 8 new business contracts won.
• 10 new cross-sell arrangements with existing customers.
• 2 new contracts won in combination with GM Holden Fleet team – a

strong and constructive relationship emerging.

• Full tender book.

Outlook

• 1Q FY11 results in accordance with our budgetary expectations.
• A year of prioritisation and execution.
• Complete integration of Interleasing.
• Prepare for Interleasing fleet lease system upgrade. CAPEX allowed for,

with contingency, in acquisition modeling.

• Ongoing profitable growth through:

P 14 October 2010

• New customer acquisition.
• Cross-selling between business units.
• Improving participation rates.
• Maintenance of outstanding customer service metrics.
• Ongoing productivity improvements.
• Careful management of residual, credit and interest rate risks.

Key Sensitivities for FY11

New car sales market. Second hand car values. Interest rates. Interest rate margin on operating leases.

P 15 October 2010

Key contract tender. Economic conditions generally.