Half Year Results 30 June 2008

Transcription

1 Half Year Results 30 June 2008

2 High revenue and 222 profit 1 growth Distinctive international delivery capabilities Enhanced Insurance, Procurement, HR and Banking platforms Half Year Results 30 June 2008

3 2 Richard Houghton Chief Financial Officer

4 Financial Highlights H Increase Revenue 222.4m 266.8m 20% Strong organic growth Group adjusted operating profit 13.9m 19.3m 39% XEBIT m 15.3m 44% XEBIT margin 4.8% 5.7% 90 bps XEBIT margin up by 90 basis points XPAT 2 8.4m 12.4m 48% Pro forma adjusted EPS - diluted p 5.56p 43% Rapid EPS growth Free cash flow 12.7m 21.6m 70% Strong cash generation 1 XEBIT = Xchanging s share of adjusted operating profit; excludes certain non cash items, which comprise share-based payment charges of 1.0m (H1 2007: 0.2m) and amortisation of intangible assets previously unrecognised by acquired entities. 2 XPAT = Xchanging s share of adjusted profit after tax; add backs to profit for the period comprise amortisation of intangible assets previously unrecognised by acquired entities, share-based payment charges, imputed interest on put options, imputed interest on employee loans and the related tax thereon. 3 Pro forma adjusted EPS diluted is based on Xchanging s share of adjusted profit after tax (XPAT) EPS shown calculated by adding the weighted average number of shares issued between IPO and 30 June 2007 to the actual number of shares in issue at IPO. 3 continued strong organic growth and profitability

5 Revenues 20% growth in Revenue from H to H Half Year Full Year m

6 Revenue visibility Visible revenue ( m) Basis of preparation Visible revenue - beginning of year Visible revenue - half year Revenue achieved Visible revenue comprises the following: Annuity revenue from contracts which have a remaining contracted period greater than one year % 84% 95% Revenue at risk which is contracted revenue that is volume dependent after contingency. Renewals where there is an ongoing relationship and for which contracts renew within a year expected to remain at similar levels

7 Profits Xchanging share of EBIT Xchanging share of profit after tax m % 15.3 m % H H H H H H Note: Pre share-based payments of 1.0m (H1 2007: 0.2m) and exceptional items and after add backs 6

8 Margins Xchanging EBIT margin Margin drivers Revenue growth and improvements in productivity % % % % 5.7 EBIT margins 1 Reduction in central costs Margin dilution from Fondsdepot Bank Enterprise Partnership H H H Historically, H2 margins have been considerably higher than H1 1 Group adjusted EBIT margin includes minorities Note: Pre exceptional items and share-based payments and after add backs of 1.3m (H1 2007: 6.3m) 7 84

9 Segmental performance Business Lines Revenue Resilience m m FY H H H Adjusted operating profit Revenues spread across sectors and services many insensitive to economic conditions Revenue at risk mainly in procurement where BAE Systems is the largest customer (insulated from general economy) Limited exposure to Business Support 2 0 H H H Figures shown include inter-segment revenue and contribution. 8

10 Segmental performance Insurance Revenue Resilience m m FY H H H Adjusted operating profit Revenues largely driven by level of premiums/claims Strong position in London Insurance Market Limited exposure to Business Support H H H Figures shown include inter-segment revenue and contribution. 9

11 Segmental performance Financial Markets Revenue Resilience m m FY H H H Adjusted operating profit Deutsche Bank contract is fixed priced 3rd party revenues linked to drivers insulated from economic conditions e.g. tax statements/agms Increased regulatory burden on customers 2 0 H H H Figures shown include inter-segment revenue and contribution. 10

12 Profit & Loss 1 m Revenue Cost of Sales Gross profit Administrative expenses Adjusted operating profit Net finance (costs)/income Adjusted profit before tax Taxation Adjusted profit for period Profit attributable to minority interests Profit attributable to equity holders of the Group (XPAT) H (200.8) 21.6 (7.7) (3.6) H (239.8) 27.0 (7.7) (6.5) Pro forma adjusted EPS basic Pro forma adjusted EPS diluted 1 Pre exceptional items and share-based payments and post add backs of 1.3m (H1 2007: 6.3m) 3.98p 3.89p 5.77p 5.56p 11

13 Key balance sheet data m FY 2007 H Cash Assets Non-current assets Trade and other receivables Net cash of 106.1m at H (FY 2007: 98.4m). This includes centrally available cash balances of 59.3m (FY 2007: 57.5m) 1. Cash and cash equivalents Liabilities Current liabilities (109.6) (109.7) Pensions Net current assets The pensions net deficit is materially the same as at year end 2007 at 8.6m. Total assets less current liabilities Non-current liabilities (61.5) (60.4) Net assets Xchanging share of net assets Minority interests Centrally available cash balances do not include the cash held in Enterprise Partnerships 12 90

14 Strong cash flow m Cash generated from operations Tax Capex 1 Free Interest Cash flow H Free Cash flow H Includes pre contract costs 13

15 Capital expenditure 6.0 Capex as % of revenue Depreciation as % of revenue % Expected long term rate H FY 2006 H FY 2007 H Significant investments in securities processing platform and electronic processing in the London Insurance Market Investments will generate incremental revenue from 2009 onwards 14

16 15 David Andrews Chief Executive

17 Fast-growing international pure play business processor ,300+ employees Fast Growing Operations in 7 countries International Xchanging Cost for Profit Pure Play Blue Chip Customers Customers in 35 countries Policy Strategy Core Business Industry Specific 16 with blue chip customers

18 Strong H1 performance High revenue and profit growth 20% revenue increase 44% XEBIT increase 21.6m free cash flow 1 Enhanced Insurance, Procurement, HR and Banking platforms Allianz Global Investors EP implementation success, with 15% growth in third party accounts since deal was signed Insurance electronic market implementation success, delivering additional revenues for new services in 2009 Cooper Gay outsourcing lift and drop win Distinctive international delivery capabilities French market foundation with the Mercuris acquisition, delivering 400m annual procurement spend in banking Over 830 offshore processing roles in India for UK and German customers (over 80 new roles in 2008) 36 customers in US and Bermuda with 10 in Asia Pac 1 Post capital expenditure, interest and tax 17 with high resilience

19 Driving Xchanging s electronic processing success London Insurance Market success US springboard Xchanging software installed in over 30 US Insurers and Brokers Xchanging providing direct access for premium settlement and claims processing 75,000+ ACORD DRI messages processed a week Two ACORD awards for Leadership in Straight through Processing and Outsourcer In Q2, the Repository published 2.5 million web pages a week Over 160 customers connected to the Xchanging Distribution Hub 90% of original premiums submitted via the Repository Asia Pacific springboard Xchanging software and hosting services provided to over 10 Insurers in Asia Xchanging India has over 200 IT experts in Insurance Xchanging s Kuala Lumpur IT centre serves the Chinese speaking markets 18 New outsourcing customer Cooper Gay to expand the Xchanging Broking Services platform to become the global insurance processor

20 Xchanging is a key part of Xchanging services Top 5 German players 1. Securities processing 2. Procurement 3. Retail investment account management 4. Taxation processing 5. Portfolio pricing Banking 1 1. Deutsche Bank 2. Commerzbank 3. Dresdner Bank 4. DZ Bank 5. Landesbank Baden- Wurttemberg Insurance 1. Allianz Vers. 2. Axa 3. Gerling KAllgemeine 4. R&V Allgemeine 5. Allianz Global Regulatory drivers 1. Abgeltungssteuer 2. SEPA 3. Basel II 4. MiFid Procurement services 300 Private banks; ~ 1250 Cooperative banks and central institutions; ~ 450 Savings banks and central institutions 2 19 Mercuris manages over 400 million in procurement spend for Groupe Caisse d Epargne, a leading universal bank in France 1 Source: Company information, Bundesverband der deutschen Banken. 2 Source: Finanzplatz Vol 4 July 2008 CAD IT Strategic investment in CAD IT, provider of securities processing software to 60% of the Italian market European Financial Services consolidation

21 Balancing business processing Lloyd s Building Farnborough Preston Hof Deutsche Bank Branch Sossenheim Staff c. 22% Staff c. 60% India (Gurgaon) Kuala Lumpur India (Partner in Bangalore) Staff c. 18% 20 on a global scale

22 The Xchanging strategy Grow existing platforms Add new platforms Partnering +4 Go to Market Offerings for sustained growth Acquisition adding volume Partnering rocket booster for new sectors and geographies Acquisition international scale market access Processing Centres 7 Production Assets Global IT Hosting Lean Processor Acquisition adding scale adding capability 21 to become the global business processor

23 Xchanging making good progress Strong existing businesses Well placed to deliver organic growth Strong resilience to current economic conditions Strategically well positioned Heart of European financial services consolidation Global electronic Insurance processing opportunities Strong in procurement the fastest growing business processing market Confident in the outlook for the full financial year Exciting opportunities Pipeline reflects an increasing volume of new opportunities Continue to seek acquisitions that complement and strengthen our proposition 22 8 to be the leading international pure play business processing company

24 23 Appendix

25 Operating cash flow Cash conversion (Pre Investment) 1 Notes m % 165% 177% H H H % 150% 100% 50% 0% Cash conversion in H1 v H2 primarily influenced by prepayment of annual service charges in certain insurance businesses. Operating cash flow Cash conversion 1 Cash conversion ratio, calculated as cash generated from operations divided by the Group s adjusted operating profit

26 Operating cash flow (continued) m Operating cashflow Tax Net cash from operating activities H (4.6) 18.3 H (2.6) 31.6 Acquisitions Capex Interest received Other Net cash used in investing activities (58.0) (6.5) (62.5) (5.7) (13.1) (15.2) Net proceeds from issue of shares Interest paid Dividends paid to minorities Dividends paid to equity shareholders Net cash from/(used in) financing activities 77.7 (1.1) (3.1) (0.4) (3.9) (4.3) (7.7) Effects of exchange adjustments Net increase/(decrease) in cash and cash equivalents (1.0) 7.7 Cash and cash equivalents at 1 January Cash and cash equivalents at 30 June

27 Key performance indicators Reconciliation of Group profit to XEBIT and XPAT m XEBIT Adjusted profit attributable to minority interests Less - Net exceptional items - Share-based payments - Other add backs Operating profit H (5.9) (0.2) (0.2) 7.6 H (1.0) (0.3) 18.0 XPAT Adjusted profit after taxation attributable to minority interests Less - Net exceptional items - Share-based payments - Other add backs Tax effect of above Profit for the period (6.3) (0.2) (0.7) (1.0) (0.3)

28 Financial summary (Statutory) m Revenue Cost of Sales Gross profit Administrative expenses (pre exceptional items) Operating profit (pre exceptional items) Net exceptional items Operating profit Exceptional finance costs Net finance (costs)/income Profit before tax Taxation Profit for period H (201.0) 21.4 (7.9) 13.5 (5.9) 7.6 (0.4) (0.1) 7.1 (2.8) 4.3 H (240.1) 26.7 (8.6) (6.2) 14.6 Profit attributable to equity holders of the Group Profit attributable to minority interests Pro forma EPS - basic Pro forma EPS - diluted p 1.05p p 5.10p 27