Full year results – 30 June 2016 GBST Holdings Limited (ASX: GBT)
FY2016 – Financial Performance • Lower revenue and earnings due to delayed 30-Jun-16 30-Jun-15 Results for the year ended: % project starts and reduced services revenue $m $m Change • Operational restructure to focus on retail wealth Revenue 108.1 114.3 (5) and institutional markets Operating EBITDA 20.0 24.5 (18) • Margins improved from 15% in the first half to Operating EBITDA % Margin 18% 21% 18% for the full year Restructure and other non-operating (2.8) 0.0 expenses • Restructure and other non-operating expenses EBITDA 17.2 24.5 (30) relate to legal and organisational restructuring Finance expense (0.8) (0.0) expenses, new CEO recruitment costs and statutory entitlement expenses related to CEO Depreciation & operating amortisation (3.2) (3.2) (3) transition Investment amortisation (4.1) (4.0) (3) • Investment amortisation charges up due to FX PBT 9.1 17.3 (48) movement on valuation of underlying assets Income tax credit\(expense) 0.2 (2.1) • Finance expenses relate to FX movements Effective tax rate (2%) 12% • Income tax credit due to R&D concessions and NPAT 9.3 15.3 (39) $2m UK income tax refund related to prior period Adjusted NPAT 13.4 19.2 (31) offsetting paid tax EPS (cps) 13.8 22.9 (39) • Adjusted NPAT adds NPAT and investment Adjusted EPS (cps) 19.9 28.9 (31) amortisation charges 2
FX impact on H2 Results • Operating EBITDA for the first half was GBST – Currency comparison summary $8.5m • Operating EBITDA for the second half improved Actual Restated to $11.5m, but had it not been impacted by FY16 H1 H2 Rst.H2 Rst.FY16 Change negative FX movements, on a constant currency $m $m $m $m $m $m basis 2H operating EBITDA would have been $12.5m, in line with guidance Australia 15.9 7.0 8.9 8.9 15.9 0 • UK Wealth Management operations are primarily in £ sterling; adverse foreign exchange movements in the second half were $1.3m International 4.1 1.5 2.6 3.5 5.1 1.0 • International capital markets operations are primarily in US$ and benefited from favourable Operating foreign exchange movements of $0.3m 20.0 8.5 11.5 12.5 21.0 (1.0) EBITDA 3
GBST FY16 Highlights • • A U S T R A L I A GBST Composer migration continues E U R O P E GBST well positioned to benefit for major client from industry consolidation • • Pensions Freedom and ‘At New business process optimisation Retirement’ creating new partnership announced with fund administrator opportunities • • Capital markets revenue growth Adverse Brexit impact to H2 despite competitive market • Major R&D investment in GBST • Two institutional clients went ‘live’ on Composer under way and GBST Syn~ progressing well • GBST Syn~ ‘live’ at the top two • New management team in place, U S A A S I A brokers-dealers in Hong Kong based in Florida • GBST Syn~’s reputation enhanced • Foundation client using GBST Syn~ with each new implementation to transact throughout US, Canada and Europe – phase 2 • Large GBST Syn~ rollout at major implementation under way global bank continues, building on • initial successes Potential catalyst for growth from demand for international post-trade processing and pending regulatory changes such as Department of Labour (DOL) reform 4
Group Revenue • Brexit uncertainty delayed starts to projects in UK impacting H2 revenue • License revenue strong due to new clients going ‘live’ and increased variable fee activity with existing customers (number of accounts or equity market volumes) • High quality recurring license fee revenue now 65% of total, comprising annuity income based on long-term client contracts • Services revenue relates to new implementations and product development • As projects complete, service revenue transitions to license fee annuity income and variable activity-based fee structures 5
Group Revenue Analysis • International revenue impacted by weakening of GBP in H2 • International wealth management revenue impacted by Brexit, adverse FX impact and project delays • Australian capital markets revenue increased despite tough trading conditions • International capital markets continued to expand with growth in Asia and the US • International revenue represents 53% of total revenue 6
Operating EBITDA • Significant improvement in second half compared to first half, despite adverse FX impact • Benefits of new leadership and restructured organisation starting to be realised • Increased investment in GBST Composer in H2; project is progressing well • R&D in FY16 approximately 15% of revenue • All GBST R&D investment is expensed as incurred • International capital markets loss significantly reduced from $3.6m in H1 to $0.9m in H2 7
EPS and Dividend • Earnings per share (EPS) 13.8 cents per share • Adjusted EPS 19.9 cents per share • Final dividend declared 5.5 cents per share, fully franked; dividends for the full year 11 cents • All dividends are fully franked • Dividend paid $7.4m (FY15 $6.3m); payout ratio 55% of adjusted NPAT • Record date for entitlement is 30 September 2016 • Payment date is 14 October 2016 • Franking credit balance $16.2m (30 June 2015: $16.8m) 8
Financial Position • Cash $9.0m at 30 June 2016; GBST has 30-Jun-16 30-Jun-15 Financial position as at no debt $m $m • Other current assets includes increased ASSETS WIP balances on various projects, now Cash 9.0 7.8 transitioned to debtors and invoiced Other current assets 22.0 23.8 Intangible assets 48.9 54.3 • Intangible assets primarily comprise Other non-current assets 14.5 14.6 purchased software and client contracts TOTAL ASSETS 94.4 100.5 (expensed over 5-10 years); and goodwill (not amortised) LIABILITIES Current liabilities 12.7 16.3 • Carrying value of intangible assets Unearned income 9.6 10.4 comprises InfoComp ($30.0m), Coexis Non-current liabilities 6.2 7.3 ($12.1m), and other intangibles ($6.8m) TOTAL LIABILITIES 28.5 34.0 • Unearned income represents advance NET ASSETS 65.9 66.5 payments from clients for licenses and services; the balance varies due to timing EQUITY of payments and projects Issued capital 38.4 37.7 • Reserves movement relates to foreign Reserves (1.3) 1.9 currency translations and employment Retained earnings 28.8 26.9 benefits reserve changes TOTAL EQUITY 65.9 66.5 9
Cash Flow • Cash flow from operations (excluding 30-Jun-16 30-Jun-15 Results for the year ended: interest and taxes) of $11.9m $m $m • 101% cash conversion of EBITDA to cash CASH FLOWS FROM OPERATIONS Receipts 117.8 123.0 flow in H2, up from 26% in H1 Payments (104.9) (97.6) • 75% conversion of EBITDA to cash flow Finance costs (0.1) (0.1) Income tax (0.9) (4.9) for year Net cash from operations 11.9 20.4 • Strong cash flow from annuity income CASH FLOWS FROM INVESTMENTS • Intangibles purchases relate to third party Purchase of tangible assets (2.4) (2.9) Purchase of intangible assets (0.1) (0.7) software acquired for use within the Net cash used in investments (2.5) (3.6) business • No internal development costs are CASH FLOWS FROM FINANCING Repayment of finance leases (0.3) (0.7) capitalised Repayment of borrowings - (5.0) Dividends paid (7.3) (6.3) Net cash used in financing (7.6) (12.0) NET INCREASE IN CASH 1.8 4.8 Effect of exchange rate fluctuations on cash held (0.6) 0.6 Opening cash 1 July 7.8 2.3 CLOSING CASH 9.0 7.8 10
GBST Wealth Management – Financial Performance Better H2 in Australia with improved 30-Jun-16 30-Jun-15 % revenue and earnings $m $m Change Revenue - Australia 17.8 19.0 (6) UK revenue impacted by Brexit uncertainty, Revenue - International 43.9 50.1 (12) adverse FX and project delays Revenue - Total 61.7 69.1 (11) Operating EBITDA - 4.6 7.4 (38) Australia Increased investment in GBST Composer Operating EBITDA - 8.7 11.4 (24) technology, project progressing well and International early client feedback positive Operating EBITDA - Total 13.3 18.8 (29) 11
GBST Wealth Management – Highlights • Full compliance with Pensions • Multiple database support with Freedom reform Microsoft SQL facilitates a common technology stack across GBST • ‘At retirement’ provides opportunities products for GBST • Introduced new flexibility and scalability for GBST Composer and ComposerWeb R E G U L AT I O N P R O D U C T S • License revenue 47% • GBST Tax Analyser now provides of international sales MSCI Global Index after-tax • Rapidly growing UK calculations wraps and platforms S I G N I F IC AN T market L O N G - T E R M • Total assets managed O P P O R T U NI T Y in the UK estimated at M AR K E T L E AD I N G • Market share continued to expand; £6 trillion and growing P O S I T IO N GBST now has 11 UK and more than • GBST Composer multi- 30 Australia/New Zealand clients region capability will • GBST is benefiting from UK industry support expansion consolidation as clients seek opportunities where economies of scale countries regulate to protect consumers, and • Exciting new app templates being M A R K E T S C L I E N T S GBST is evaluating developed for Composer upgrade changes in South already being requested by UK Africa and the US clients 12
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