Half-year results 31 st December 2018 GBST GBST HO HOLDINGS - - PowerPoint PPT Presentation
Half-year results 31 st December 2018 GBST GBST HO HOLDINGS LDINGS LIM LIMITED ITED (ASX: (ASX:GBT) GBT) Creating vital technology solutions for the worlds leading financial brands, built on more than three decades of market expertise
GBST GBST HO HOLDINGS LDINGS LIM LIMITED ITED (ASX: (ASX:GBT) GBT)
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Revenue
$43.9
MILLION
UP
3%
EBITDA
$5.4
MILLION
1H FY18
42.7 43.9 45.6
2H FY18 1H FY19
UP
19%
1H FY18
4.6 5.4 7.6
2H FY18 1H FY19
NPAT
$3.7
MILLION
UP
48%
1H FY18
2.5 3.7 3.7
2H FY18 1H FY19
Cash NPAT
$4.4
MILLION
UP
24%
1H FY18
3.6 4.4 4.6
2H FY18 1H FY19
EBITDA Margin
INLINE
1H FY18
11% 12% 17%
2H FY18 1H FY19
EPS
CPS
UP
48%
1H FY18
3.7 5.4 5.5
2H FY18 1H FY19
Cash EPS
CPS
UP
24%
1H FY18
5.3 6.5 6.7
2H FY18 1H FY19
R&D
$10.3
MILLION
UP
113%
1H FY18
4.8 10.3 9.9
2H FY18 1H FY19
To be read in conjunction with the GBST financial report for the half-year ending 31 December 2018. Please note that due to rounding to the nearest $million, numbers presented in the table to the left may not add up precisely to the totals provided.
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Results Summary ($’millions) 1HFY19 1HFY18 2HFY18
Revenue and other income 43.9 42.7 45.6
Operating EBITDA before strategic R&D 5.8 9.7 10.5 Less strategic R&D (0.4) (4.8) (2.9)
(10.3) (4.8) (9.9)
9.9
Operating EBITDA 5.4 4.9 7.7
Restructure and other non-operating expenses
(0.1)
EBITDA 5.4 4.6 7.6 EBITDA % Margin 12% 11% 17%
Net finance costs
0.2 Depreciation & operating amortisation (1.7) (1.4) (1.2) Investment amortisation (0.7) (1.1) (0.8)
PBT 3.0 1.9 5.8
Income tax credit/(expense) 0.7 0.6 (2.1)
NPAT 3.7 2.5 3.7
Adjusted NPAT 4.4 3.6 4.6 Basic EPS (cents) 5.4 3.7 5.5 Adjusted EPS (cents) 6.5 5.3 6.7 Dividend per share (cents)
2.5 Cash inflow from operations 10.0 5.4 5.8 Cash at bank 9.6 15.0 11.4
▪ Half-year Revenue was up 3% to $43.9m from 1HFY18, $1.2m favourable to 1HFY18 with licence fees and third party up $1.7m and service revenue down $0.5m ▪ Half-year operating expenses were $38m, $5m above 1HFY18, reflecting Strategic R&D driven one-off and transitional costs; a short term contractor increase to secure client opportunities and deliver to time frames; cloud expenditure offsetting capital expenditure ▪ Gross strategic R&D investment $10.3m, up 113% from $4.8m
$4.8m), after capitalisation of $9.9m in costs (no capitalisation in 1HFY18) ▪ Operating EBITDA and EBITDA $5.4m up 12% and 19% respectively from 1HFY18 ▪ Income tax benefit of $0.7m for the half-year primarily reflects R&D tax credits. The prior half-year recorded an income tax benefit of $0.6m ▪ 1HFY19 Net Profit after tax of $3.7m up $1.2m from 1HFY18, but in line from 2HFY18 ▪ Adoption of AASB15 resulted in $1.2m net profit after tax recognised in retained earnings ▪ Net cash inflow from operations of $10.0m up 86% from 1HFY18 and 71% from 2HFY18 ▪ An interim dividend has not been declared given the significant investment required in Strategic R&D KEY POINTS
Recognised globally for quality, innovation and scalability
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AUSTRALIA
▪ Established market leading presence ▪ Post trade processing leader with 63% of market (by volume) ▪ Three new capital market customers ▪ Engaged with tier-1 wealth management organisation for strategic migration program ▪ Rollout of tax solutions continues with client uplift & new sales
UNITED KINGDOM
▪ Strong market position with over $230Bn AUM ▪ Catalyst delivered and now live ▪ Multi-year build & implementation for leading provider of retirement, investment & protection products
REST OF WORLD
▪ Custody & broking growth in Hong Kong market ▪ Strong growth opportunity for Syn~ ▪ Partnership model to drive scale in new markets such as Japan and USA ▪ Registry and fund administration software for life and pension companies, brokers, fund managers, platforms and banks ▪ Clients in Australia, Asia, New Zealand and the United Kingdom ▪ Flagship product is GBST Composer – a market leading integrated administration system ▪ GBST has a leading market position in Australian wealth management products and is well placed to benefit from continued UK industry consolidation
GBST WEALTH MANAGEMENT
▪ Capital markets transaction processing software for global and regional investment banks ▪ Clients in Australia, Asia, Europe and North America ▪ Flagship product is Syn~, a multi-product, multi-market, multi- currency, multi-entity transaction processing platform used by leading global banks and investments houses ▪ Syn~ is the post trade processing market leader in Australia with ~25% market share of transactions
GBST CAPITAL MARKETS
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OUR BUSINESS AND SOLUTIONS
Growth
OUR PEOPLE
Delighted Clients Best Solutions Enterprise Agile Performance & People
▪ Implement new Clients ▪ Expand Syn~ adoption in Asia Pacific ▪ Expand "T ax Management" solutions ▪ Expand partner distribution relationships for different markets and verticals ▪ Continual improvement in client satisfaction ▪ Retain clients with renewals ▪ Deliver projects to plan ▪ Deliver E-VOLVE releases to clients ▪ Complete Catalyst and rollout to clients ▪ Plan and scope for ASX CHESS changes to ensure client readiness ▪ Innovate and enhance product
▪ Educate, pilot and embed enterprise agile methodology ▪ Progress Dev Ops across all product lines ▪ Embed our GBST performance framework ▪ Celebrate/Reward high performance ▪ Continuously improve capabilities in our people ▪ Partner with other
key capabilities ▪ Enhance risk management culture
Long term recurring revenues with well established client base
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Long term recurring revenue with sticky customers Regulatory change is driving customers to increase investment in technology solutions. Flexible products, adaptive to clients and reporting requirements Well positioned to continue to capture change and growth in global wealth management products Investing in future opportunities and technologies to drive future revenue and market leadership Diversified business model with global client and geographic footprint
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Wealth Management – market leading position, significant long-term opportunity
MARKETS
Customers in Australia, Asia, New Zealand and the United Kingdom Significant market opportunity in the £6.9 trillion UK investment industry Market growth is driven by market and regulatory change – Composer offers a digital solution which allows wealth managers to address regulatory burden and reduce cost Total assets managed on Composer continue to grow in the UK to over $234bn GBST now powers the largest investment platform in the UK and Australian markets
CLIENTS
Focus on wealth administration and registry GBST’s Composer platform is the top direct-to-consumer software platform for distribution of tax- incentivised products in the UK Well established provider in Australian wealth management and broking Benefitting from UK industry regulatory change GBST is now partnering with Eagle investment systems to provide GBST Tax modules to their service offering
BUSINESS OPPORTUNITY
Regulatory change is increasing the reporting and compliance burden on industry participants This is forcing increased investment in automated technology solutions such as GBST Composer Increasing consumer demand for
digital platforms Catalyst Project delivered a market-leading digital front-end capability, already driving new client wins GBST is working with global pensions consultant to provide a first-of-a-kind after-tax benchmark
“We are delighted to have GBST as the strategic technology partner for
Justin Taurog, Managing Director, Sales & Distribution at VitalityInvest and VitalityLife
“By partnering with GBST, we can
growing market.“
Enrique Sacau, Head of Financial Services at Equiniti
“There are well documented difficulties in implementing Tax Aware Investment Management (TAIM), however some large funds, including Mercer, Australian Super and UniSuper have made public their use of external consultants to optimise tax management (GBST 2017). This suggests that at least some funds are taking this relatively new
and also that it is not prohibitively difficult to implement.”
Productivity Commission on GBST
ENDORSEMENTS GBST won Vitality’s 2018 New Suppli lier of the Year
Investment funds and institutions
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Revenue composition and operating EBITDA before strategic R&D and group expenditure
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$0 $5M $10M $15M $20M $25M 1H FY17 2H FY17 1H FY18 2H FY18 1H FY19 ($’millions) 1HFY19 2HFY18 1HFY18
Revenue 18.8 20.9 19.0 Operating EBITDA before strategic R&D and group expenditure 6.0 8.8 7.8
Services Licence Operating EBITDA before strategic R&D and group expenditure
▪ Revenue down 1% from 1HFY18 to $18.8m, down 10% from 2HFY18 ▪ Licence revenue up 14% to $11.9m from 1HFY18, down 7% from
for regulatory change; excluding this one-off revenue, has 1HFY19 licence revenue increasing by 5% over 2HFY18 ▪ Services revenue down 20% to $6.9m from 1HFY18, down 15% from 2HFY18 due to the completion of major projects in H2FY18 ▪ Operating EBITDA before Strategic R&D & group expenditure down 24% to $6.0m from 1HFY18, 33% down from 2HFY18; largely driven by increased hosting expenditure and increase in variable resource cost as work ramps up on client projects ▪ Working with Investec Wealth & Asset Management to power their 'Click & Invest' proposition ▪ Following the success of Vitality Invest Adviser on the Catalyst framework, GBST successfully supported Vitality’s business expansion through a direct to consumer offering ▪ Continuing to work with a leading provider of retirement, investment and protection products on the scoping and planning phase of a project that will result in the migration
savings products ▪ The new range of products that will be administered on Composer will further extend the market opportunities in the UK for other Life and Pension providers estimated at
KEY POINTS
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$0 $2M $4M $6M $8M $10M 1H FY17 2H FY17 1H FY18 2H FY18 1H FY19 ($’millions) 1HFY19 2HFY18 1HFY18
Revenue 8.2 8.4 7.0 Operating EBITDA before strategic R&D and group expenditure 2.6 4.1 3.4
Services Licence Operating EBITDA before strategic R&D and group expenditure
Revenue composition and operating EBITDA before strategic R&D and group expenditure
▪ Revenue up 17% from 1HFY18 to $8.2m; down 3% from 2HFY18 ▪ Licence revenue up 3% to $6.4m from 1HFY18; up 2% from 2HFY18 ▪ Services revenue up 126% from 1HFY18, down 18% from 2HFY18. This movement reflects the commencement of significant project work in 2HFY18, which continued into 1HFY19 ▪ Operating EBITDA before Strategic R&D and group expenditure decreased 22% to $2.6m from 1HFY18, 36% from 2HFY18; largely driven by increased hosting expenditure and support costs for legislation updates such as the ATO Member Account Transaction Services changes ▪ Successfully completed the phase 1 of a multiyear project for a leading bank client, including a range of platform
accounts to Composer from legacy platforms ▪ Released a new version of Tax Analyser, including a Transition module, that assists Transition Managers to undertake “what- if” scenarios to assist decision making and optimise returns for superannuation fund members. This was done alongside a new capability for Capital Gains Tax relief which has already provided improved returns to the members of the fund ▪ Working with a leading Australian financial institution to deliver a Digital platform for tax analysis, reporting and Tax returns preparation. This new capability will reduce costs, errors and timeframes significantly KEY POINTS
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Capital Markets - Leading Australian products; Strong international opportunity
BUSINESS OPPORTUNITY
New generation technology platform enables long term cost management and new revenue opportunities through automation and business model flexibility New distribution partnerships signed with FIS in the USA and SBI in Japan delivering further international growth
PRODUCTS
Syn~ v3.3 release started for launch in 2019 GBST embarks on voice activate capability into our Syn~ platform for clients to achieve higher productivity ASX CHESS replacement planning program commenced
MARKETS
GBST Syn~ is a multi- product, multi-market, multi-currency, multi-entity transaction processing platform in use globally Customers in Australia, Asia, Europe and North America GBST Syn~ TAC deployments and market demand are growing globally
CLIENTS
Focus is on global and regional investment banks / brokers Australian market leader, and growing list of international clients Australian market leader with ~63% market volume processed on GBST solutions
Investment banks and stock brokers
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$0 $4M $8M $12M $16M $20M 1H FY17 2H FY17 1H FY18 2H FY18 1H FY19 ($’millions) 1HFY19 2HFY18 1HFY18
Revenue 10.9 10.7 10.6 Operating EBITDA before strategic R&D and group expenditure 5.7 5.1 4.3
Services Licence Operating EBITDA before strategic R&D and group expenditure
Revenue composition and operating EBITDA before strategic R&D and group expenditure
▪ Revenue up 3% to $10.9m from 1HFY18, up 2% from 2HFY18 ▪ Licence revenue up 3% to $10.2m from 1HFY18, up 5% from 2HFY18, driven in part by the ANZ Share Invest migration to CMC Markets and the migration of Sequioa /D2MX to SHARES, which was partially offset by the negative impact from adoption of AASB15 of $0.2m ▪ Service revenue was in line with 1HFY18, and down 32% to $0.7m from 2HFY18, primarily driven by client projects completing in 2HFY18 ▪ Operating EBITDA before strategic R&D and group expenditure increased 32% to $5.7m from 1HFY18; up 12% from 2HFY18; largely driven by cost reductions ▪ Key focus is the ASX CHESS replacement program. The ASX is implementing a distributed ledger-based system that incorporates the ISO 20022 message standard. The GBST Syn~ platform is already proven to support ISO20222 in other markets ▪ “Change to Chess” presents opportunities as clients re-platform from their legacy Back Office solution to the GBST Syn~ platform. GBST is the only vendor in the market with a non-legacy platform proposition for client / prospect adoption ▪ GBST is now in the advanced stages of planning for the CHESS upgrade following client consultations in 2018 ▪ Planning to commence a new Syn~ migration for a major ASX Participant in the 2HFY19 along with the implementation of Syn~ to support International Margin Lending and Foreign Currency Cash Deposit Management for an ASX-listed Wealth Manager KEY POINTS
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$0 $2M $4M $6M $8M 1H FY17 2H FY17 1H FY18 2H FY18 1H FY19 ($’millions) 1HFY19 2HFY18 1HFY18
Revenue 6.0 5.4 6.1 Operating EBITDA before strategic R&D and group expenditure 1.5 1.6 2.3
Services Licence Operating EBITDA before strategic R&D and group expenditure
Revenue Geography
Europe, Middle East, and North America 30% Asia 70%
Revenue composition and operating EBITDA before strategic R&D and group expenditure
▪ Revenue increased 11% from 2HFY18, down 2% from 1HFY18 ▪ Licence revenue down 6% to $3.9m from 1HFY18, increased 6% from 2HFY18. 1HFY18 included a one-off licence revenue. Adjusting for this one-off licence fee, 1HFY19 grew 11% over 1HFY18 ▪ Services revenue increased 7% to $2.1m from 1HF18, primarily driven by ▪ the global roll out of Syn~ TAC for a major Investment Bank (go live mid-2019), ▪ the implementation of the Syn~ platform for Wing Lung Bank in Hong Kong (live Jan 2019) and ▪ completion and implementation of the SGX Phase 2 Post Trade requirements for three global Investment Banks in Singapore ▪ Operating EBITDA before strategic R&D and group expenditure decreased 35% to $1.5m in 1HFY19, from 1HFY18; largely driven by one-off licence revenue in 1HFY18 and increased support and pre-sales costs ▪ Actively working with North American partner FIS on the integration of Syn~ TAC to their product portfolio ▪ Our partner SBI is progressing with localising Syn~ to the Japanese market and we expect the first major delivery for production use in 2019 KEY POINTS
PROJECT E-VOLVE
Project E-VOLVE encompasses a multi-year investment programme The investment will upgrade the Composer Platform using the most update to date technology that allows it to be Cloud hosted thereby reducing
clients and opening new ways to be consumed GBST’s Catalyst platform has delivered a flexible API enabled solution which provides clients with a personalised multi-channel user experience The initiative is initially focused on the UK retail wealth market and is now being leveraged for the Australian market with new
revenue streams Ongoing investment in Syn~ to maintain the platform’s market leading Australian position and facilitate growth into Asia and North America
Syn~/ Other R&D PROJECT CATALYST
GBST is undertaking a substantial investment in strategic R&D to achieve best in class digital and client interfaces, positioning for sustainable long term growth
E-VOLVE Catalyst Syn~ + Other
Strategic R&D spend
1H FY18 2H FY18 1H FY19 1.6 2.4 3.1 5.7 6.1 3.8 0.8 1.1 0.4
$4.8m $9.9m $10.3m
Project Catalyst
Status
▪ Catalyst is complete, and live on the 1st client Vitality ▪ Awarded Vitality’s New Supplier of 2018
Benefits
Innovative interface which is personalised, fast and optimised.
Next steps
Continue with upgrades and expand use into other areas
Project E-VOLVE
Status
Database re-platform to Microsoft SQL Server ▪ UK re-platform complete for all clients by March 2019 ▪ Australian clients will be rolled out over 2019 based
Rewrite screens and functionality
▪ 15% of UK screens/functionality has been re-written and is available for clients to test and familiarise ▪ Production release scheduled for Oct 2019
Benefits
▪ SQL Server is a more widely used and lower cost database platform ▪ Cloud/API enabled functionality ▪ More efficient workflows/processing
Next steps
▪ Work with clients to upgrade and deliver the benefits, to their schedule ▪ Continue re-writing the screens/functionality
Integration with other software
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“I don’t think we could have done it quicker, or delivered the same element of quality with anyone else……very positive feedback from advisors on the speed of the journey and the efficiency of the journey”
Justin Taurog, Managing Director, Sales & Distribution at VitalityInvest and VitalityLife
Strategic program 36% complete
Catalyst 19.6% E-VOLVE Database 8.0% Maintenance functions 3.8% Complex maintenance functions 5.0% Investor and operations management 10.9% Periodic business processing 10.5% Reporting and batch processes 11.2% Regional functions 31.0%
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▪ Revenue growth from the prior corresponding period, driven by growth in licence fees, offsetting slower services
we will have increased services revenue and then recurring licence revenue ▪ Operating costs are significantly higher, reflecting a number of factors including: ▪ costs associated with transition of the business to new technologies (causing some interim duplication, and one-off training and infrastructure costs) and changes in costs (cloud hosting v capital expenditure); ▪ legislative changes and release costs also remained at high levels in both UK and Australia; and ▪ resource contention during this period of significant development activity necessitated increased contractor costs to ensure we continued to deliver all client requirements and secured new opportunities We are already experiencing lower costs in 2HFY19, and are targeting to progressively reduce costs ▪ Large scale strategic R&D program is progressing to plan, with: ▪ Catalyst delivered, operational at Vitality, and being used in new client projects; and ▪ E-VOLVE being progressively delivered and adopted by clients
Continuing to transform and extend client opportunities
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Financial position as at: ($’millions) 31 Dec 2018 30 Jun 2018
Assets
Cash 9.6 11.4 Other current assets 25.0 25.1 Intangible assets 40.4 41.8 Software systems internally developed 18.6 8.7 Other non-current assets 17.5 14.5 Total assets
111.1 101.5 Liabilities
Current liabilities 16.5 17.0 Unearned income 14.2 10.3 Non-current liabilities 8.1 5.5 Total liabilities
38.8 32.8 Net assets 72.3 68.7 Equity
Issued capital 39.5 39.5 Reserves (3.0) (3.4) Retained earnings 35.8 32.6 Total equity
72.3 68.7
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KEY POINTS
▪ Cash on hand of $9.6m at 31 December 2018 ▪ GBST has no debt ▪ Other current assets includes trade debtors, WIP and Contract Asset balances for various projects (which are transferred to trade debtors once invoiced) ▪ Software systems internally developed includes $9.9m of software capitalised under the Strategic R&D program that met the accounting capitalisation criteria during the half ▪ Intangible assets primarily comprise purchased software, client contracts and goodwill from business acquisitions ▪ Carrying value of intangible assets comprises InfoComp ($28.2m), Coexis ($7.9m) and other intangibles ($4.3m) ▪ Other non-current assets includes an increase in deferred tax assets comprising of tax losses and carried forward R&D tax offset credits ▪ Unearned income represents client invoicing in advance of revenue recognition, with increased licence invoices raised in 1HFY19 ▪ Non-current liabilities includes an increase in deferred tax liabilities due to R&D claims for internal capitalised development
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KEY POINTS
▪ Strong operating cash flow generation ▪ Income tax paid offset by UK income tax refund (prior period credit). ▪ Software systems internally developed of $9.9m relates to software capitalised under the Strategic R&D Program
Results for the half-year ended: ($’millions) 1HFY19 1HFY18 2HFY18
Cash flows from operations
Receipts 53.7 47.6 44.1 Payments (43.2) (42.2) (38.2) Finance costs (0.1) (0.1) 0.2 Income tax (0.4) 0.1 (0.3) Net cash from operations 10.0 5.4 5.8
Cash flows from investments
Purchase of tangible assets (0.3) (0.3) (0.6) Purchase of intangible assets
(0.2) Software systems internally developed (9.9)
Net cash used in investments (10.2) (0.4) (7.8)
Cash flows from financing
Financing
(0.1) Dividends paid (1.7) (1.7) (1.7) Net cash used in financing (1.7) (1.8) (1.8)
Net (decrease)/increase in cash (1.9) 3.2 (3.8)
Effect of FX movement on cash held 0.1 0.1 0.2 Opening cash – 1 July 11.4 11.7 15.0
Closing cash 9.6 15.0 11.4
GBST Group 31 Dec 2018 $’000
Net profit without adoption of AASB15 3,751 Adjustment to profit Revenue from licence and support sales
534
(686) Sales and marketing expenses
178
(109) Decrease in profit before income tax (83) Income tax benefit – prima facie decrease in tax expense due to above 25 Decrease in net profit due to adoption of AASB 15 (58) Profit attributable to members of the parent entity as reported under AASB15 3,693
For the half-year ended 31 December 2018
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While every effort has been made to provide accurate and correct information in this presentation, GBST Holdings Limited does not warrant or represent that the information is free from errors or omissions. To the extent permitted by law, no responsibility for any loss, damage, cost or expense arising in any way form anyone acting or refraining from acting as a result of information in this presentation is accepted by GBST Holdings Limited. This presentation is not investment advice that can be relied upon as it has not been prepared considering any individual’s objectives, financial position or needs.
Disclaimer
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