SAI GLOBAL LIMITED. Financial Report Half-Year Ended 31 December 2014

Transcription

1 SAI GLOBAL LIMITED Financial Report Half-Year Ended 31 December 2014

2 and controlled entities Directors report The Directors present their report on the consolidated entity (the Group or SAI) consisting of SAI Global Limited (the Company) and the entities it controlled at the end of, or during, the half-year ended 31 December Directors The following persons were directors of SAI Global Limited during the whole of the half-year and up to the date of this report unless otherwise stated: Andrew Dutton Chairman Executive Chairman until 5 November 2014 Peter Mullins Chief Executive Officer Appointed on 5 November 2014 Robert Aitken Non-Executive Director Anna Buduls Non-Executive Director Peter Day Non-Executive Director Deputy Chairman until 5 November 2014 Sylvia Falzon Non-Executive Director David Spence Non-Executive Director Andrew Dutton was Executive Chairman from the beginning of the period until 5 November 2014, when he reverted back to the position of Non-Executive Chairman. Peter Day was Deputy Chairman from the beginning of the period until 5 November Review of operations Sales revenue increased from $262.9 million to $268.4 million, an increase of 2.1% over the prior corresponding period. Revenue growth in constant currency terms was 0.8%, reflecting a mixed performance across the businesses, as detailed further below. The operational efficiency initiatives undertaken in the prior period and continuing in the current period have contributed to improved profitability in the first-half of FY15. Earnings before interest, tax, depreciation and amortisation (EBITDA) were $51.1 million, an increase of 6.2% over the prior corresponding period. This EBITDA result includes the adverse impact of a number of significant charges which are itemised later in this report. Underlying EBITDA, which excludes the adverse impact of the significant charges, was $58.7 million, an increase of 13.6% over the underlying EBITDA in the corresponding period. The weaker Australian dollar has also contributed favourably to the Group s performance, adding 1.3% to the revenue growth and 3.1% to the EBITDA growth achieved on a constant currency basis. The Australian dollar averaged USD in the first-half compared with USD in the corresponding period, a depreciation of 3.4%. The statutory net profit after tax of the Group attributable to shareholders was $19.5 million, after accounting for non-controlling interests of $185k. This represents an increase of 8.2% over the result for the prior corresponding period of $18.0 million, driven by the favourable impact of operational efficiency initiatives undertaken in the prior period. After excluding the adverse impact of 1

3 the significant charges, the underlying net profit after tax attributable to shareholders was $25.0 million, an increase of 21.6% over the corresponding period. Statutory earnings per share increased 7.0% to 9.2 cents, up from 8.6 cents in the prior corresponding period. Operating cash inflows for the period were $24.5 million, down from the $36.3 million achieved in the prior corresponding period, reflecting increased tax payments, the impact of the significant charges and a reduction in creditor balances. The Directors have resolved to increase the interim dividend to 7.5 cents per share, up from 7.0 cents in the corresponding period. This dividend will be partly franked to 60%. Further details relating the performance of the business are provided later in this report. Summary financials Statutory Underlying 1 $ 000 1H15 1H14 Change 1H15 1H14 Change Sales revenue 268, , % 268, , % Other income/(net expense) (282) 360 (282) Segment revenue 268, , % 268, , % Less: direct costs 125, ,760 (1.8%) 125, ,760 (1.8%) Gross profit 143, , % 143, , % Less: overheads 92,234 86, % 84,611 83, % Earnings before interest, tax, depreciation and amortisation (EBITDA) 51,077 48, % 58,700 51, % Less: depreciation 12,386 11, % 12,386 11, % Less: amortisation of acquired intangible assets 5,714 6,110 (6.5%) 5,714 6,110 (6.5%) Earnings before interest and tax (EBIT) 32,977 30, % 40,600 34, % Add: share of net profits of associated companies % % Segment result 33,105 30, % 40,728 34, % Less: net financing costs 3 5,723 5,842 (2.0%) 5,723 5,842 (2.0%) Net profit before income tax 27,382 24, % 35,005 28, % Less: income tax 7,667 6, % 9,801 7, % Net profit after income tax 19,715 18, % 25,204 20, % Profit is attributable to: Equity holders of SAI Global Limited 19,530 18, % 25,019 20, % Non-controlling interests % % 19,715 18, % 25,204 20, % 2. Excludes interest income 1. Excludes significant charges 3. Interest expense less interest income 2

4 The summary financial analysis above shows the results both on a statutory and underlying basis. The underlying basis is a non-ifrs measure that, in the opinion of the Directors, is useful in understanding and appraising the Company s underlying performance. The underlying basis excludes significant charges, the largest of which in the period relates to external professional fees and associated incidental charges incurred in responding to the unsolicited, indicative, conditional and non-binding proposal received in May 2014 and conducting a formal process to review strategic options. In general terms, significant charges are associated with acquiring and integrating new businesses, costs associated with any major restructuring within the business, any impairment charges and any other specific items deemed to be significant on account of their nature or size. Reconciliation of statutory to underlying result A reconciliation of the statutory result attributable to shareholders to the underlying result is provided below: $ 000 1H15 1H14 Change Statutory net profit after tax attributable to equity holders of SAI Global Limited 19,530 18, % Add back significant charges net of tax: Accounting, legal, tax, advisory and other incidental costs incurred in responding to the unsolicited, conditional and nonbinding approach to acquire the Company and subsequent process Operational efficiency initiatives (consulting fees, terminations and office rationalisation) Incidental charges relating to acquisitions Closure of Canadian Defined Benefit Pension Plan IT governance review Less: income tax impact of significant charges Significant charges net of tax Underlying net profit after tax attributable to equity holders of SAI Global Limited 5,228-2,294 1, ,623 3,591 2,134 1,053 5,489 2,538 25,019 20, % In May 2014 the Company announced that it had received an unsolicited, indicative, conditional and non-binding proposal from Pacific Equity Partners Pty Limited to acquire 100% of the outstanding shares in the Company through a recommended scheme of arrangement for an indicative price in the range of $5.10 to $5.25. In June 2014 the Board announced that the Company had been approached by a number of other parties also expressing interest in SAI and its businesses and that the Board had determined that it was in the best interests of shareholders to conduct a formal process to review its strategic options. The process concluded on 13 October 2014 following the Board s determination that discussions would not result in a transaction that would be in the best interests of the Company s shareholders. The significant item of $5,228k in the table above is the combined cost of external professional fees and associated incidental charges incurred in the period of responding to the proposal and conducting the formal process. 3

5 Discussion of summary financials In recognition of the fact that the Property Services business is now managed and reported internally as a separate business, distinct from the Standards and Technical Information business, these two businesses have been reported as separate business segments in note 2. In prior periods these businesses jointly formed, and were reported as, the Information Services division. Prior period comparatives have been restated to reflect the disclosure adopted in the current period. To assist in the understanding of the drivers of net profit after tax, the following discussion includes a review of revenue, EBITDA, interest, depreciation and tax. Sales revenue increased by 2.1% over the prior corresponding period, driven by the combination of the weaker Australian dollar, organic growth and contributions from recent acquisitions. $M Consolidated 1HFY15 Revenue Analysis $262.9M $8.8M $1.0M The impact on revenue of acquisitions made in the current and prior periods (net of organic growth) was $1.0M $1.2M Organic revenue growth in constant currency terms was $1.2M or 0.5% Revenue growth on a constant currency" basis was 0.8% $265.1M $3.3M The weaker A$ had a positive impact on revenue relative to prior period exchange rates, increasing revenue by A$3.3M $268.4M Revenue growth including the impact of movements in foreign exchange rates was 2.1% HFY14 Growth from acquisitions Organic growth Growth on a constant currency basis Impact of weaker Australian dollar 1HFY15 The revenue growth of 2.1% is below recent trends. The organic revenue growth profile was mixed across the business. Property Services and Assurance Services experienced positive organic growth, whereas Compliance Services and Standards and Technical Information experienced reduced revenue, the latter due to reduced sales of the Pressure Vessel Code which was revised and had a positive impact in the prior corresponding period. Stronger revenue growth is projected in the second-half. Underlying EBITDA increased 13.6% from $51.7 million to $58.7 million. 4

6 $M 60.0 Consolidated 1HFY15 EBITDA Analysis $48.1M $3.6M Significant charges of $3.6M were incurred in 1HFY14 $51.7M Underlying EBITDA in 1HFY14 was $51.7M $0.3M The impact of acquisitions made in the current and prior periods (net of organic growth) was $0.3M $5.2M Organically, underlying EBITDA increased by $5.2M, or 9.9% $57.1M Underlying EBITDA in 1HFY15 on a constant currency basis was up 10.5% $1.6M The weaker A$ had a positive impact relative to prior period exchange rates, increasing underlying EBITDA by $1.6M $58.7M Underlying EBITDA growth including the impact of movements in foreign exchange rates was 13.6% $7.6M Significant charges of $7.6M were incurred in 1HFY15 "Statutory" EBITDA was up 6.2% on the prior corresponding period $51.1M HFY14 "Statutory" EBITDA Add back 1HFY14 1HFY14 significant chargesunderlying EBITDA Growth from acquisitions Organic growth Growth on a Impact of weaker constant currency Australian dollar basis 1H15 Underlying EBITDA Significant charges 1HFY15 "Statutory" EBITDA On a constant currency basis underlying EBITDA grew by 10.5% which includes a small contribution from recent acquisitions. All businesses achieved EBITDA growth. This growth reflects the focus on improving operating efficiency and the positive impact flowing from a weaker Australian dollar. The EBITDA margin expanded to 21.9%, a marked improvement from the 19.7% achieved in the prior corresponding period. The charge for depreciation increased to $12.4 million, up from $11.4 million in the corresponding period, reflecting the impact of the investment in new product development and enhancing the IT infrastructure and Compliance Services platforms. The charge for amortization of identifiable intangible assets reduced to $5.7 million, down from $6.1 million in the prior corresponding period. In the absence of significant acquisitions, this charge will continue to reduce year on year, as the assets acquired become fully amortised. The intangible assets consist of the assessed values of acquired customer relationships and contracts, product delivery platforms and intellectual property. The net financing charge of $5.7 million consists of an interest expense of $5.8 million net of interest received of $70k. This net charge was down from $5.8 million in the corresponding period reflecting the generally low interest regime internationally. Operating margins and the effective tax rate relating to the underlying result are summarised below: Underlying 1 Margin analysis: 1H15 1H14 Change Gross profit 53.4% 51.3% 2.1% EBITDA 21.9% 19.7% 2.2% EBIT 15.1% 13.0% 2.1% Cost to income ratio % 84.7% (1.9%) Effective tax rate 28.0% 27.2% 0.8% 1. Excludes significant charges 2. Direct costs, overheads and depreciation as a proportion of segment revenue Business combinations In July 2014 OCICERT Mexico SA de CV was acquired. This acquisition adds scale to our existing management systems certification business in Mexico and will help 5

7 SAI to better serve clients in Latin America. The acquisition of OCICERT will provide the following benefits to SAI: The ability to better serve our global clients by growing our capability and footprint in Latin America. It adds over 400 new clients distributed across many sectors including manufacturing, services, health and food. It increases our portfolio of Spanish language training courses which can be sold throughout Latin America. In October 2014 the Company announced that it had signed an agreement with Encompass Corporation to purchase the exclusive perpetual rights for Australia to the Encompass commercial data retrieval and analysis service. Consideration was $8 million. Encompass will enable SAI to provide a comprehensive, easily understood map of all relevant publicly available records on individuals and corporates. It is currently used by banks for mortgage lending and financial risk assessment; legal and accounting insolvency research; taxation and policing services as well as some sales oriented clients. Provided under a Software as a Service (SaaS) model, the Encompass rights give SAI a market leading capacity through a unique visualisation and commercial information management solution. This unique software enables users to graphically work with information and data that is traditionally held in cumbersome text based reports sourced from government agencies, credit bureaus and other data companies. Such information is generally time-consuming to collate and analyse effectively in the absence of a tool like Encompass. Business operations A summary of segment revenue and underlying earnings is set out below: $ 000 Revenue 1 Underlying EBITDA 1H15 1H14 Change 1H15 1H14 Change Standards & Technical Information 38,309 38, % 20,248 19, % Compliance Services 46,530 46,861 (0.7%) 14,956 12, % Assurance Services 98,511 94, % 17,725 14, % Property Services 86,878 84, % 15,215 11, % 270, , % 68,144 58, % Eliminations 1,789 1, % , , % 68,144 58, % Corporate Services - - 9,444 6, % Segment Revenue and EBITDA before significant charges 268, , % 58,700 51, % Less: depreciation 12,386 11, % Less: amortisation of acquired intangible assets 5,714 6,110 (6.5%) Add: share of net profits of associated companies % Segment result before significant charges 40,728 34, % 6

8 Standards & Technical Information This business distributes technical and business information such as Australian and global Standards, legislation and other technical information, and also provides internally developed intellectual property such as bibliographic databases and information workflow solutions. This business grew underlying EBITDA by 2.9% despite minor revenue growth of 0.2%. Revenue growth in the APAC region of 3.9%, was diluted by a decline in EMEA. This decline relates predominantly to the ASME Pressure Vessel Code which is published every two years and caused a spike in EMEA publication revenue in the prior year. Subscription revenues continue to grow and represent 71.5% of the half-year revenue mix compared with 67.8% in the previous corresponding period. The trend in the market is that both the publishers of standards and our clients prefer to provide and buy subscription based solutions, respectively. SAI Global and Standards Australia continue to have discussions on a range of topics as part of an effective working relationship, including the mutually shared desire to expand the distribution of Australian Standards. The business is expected to grow in the second-half as revenues flow through as a result of the recent exclusive agreement with the British Retail Consortium. Compliance Services The division is now organised along global functional lines facilitating the development of a comprehensive compliance management platform which provides client organisations with a consolidated view of their compliance programs. During the first-half the business completed a major release of Compliance 360 (C360), the Company s governance risk management and compliance (GRC) solution, including a complete overhaul of the user interface and user experience and the addition of significant new functionality in response to market needs. We have also progressed development of the compliance system of record by opening up the C360 platform to interface to other platforms and applications. In addition, we are adding international functionality (e.g. multi-date formats, currencies and languages), and introducing a robust reporting and business intelligence capability. These enhancements will be progressively delivered through We have reassessed our Learning strategy: We have improved and stabilised our legacy learning management platforms and, as a result, have seen a significant improvement in our client retention rates. Given the quality and flexibility of recently developed and commercially available third party Learning Management Systems, and after an internal review, we have come to the conclusion that it is strategically beneficial for us to seek to partner with a specialist LMS provider rather than build our own. In the meantime we are working to make more of our content playable on multiple LMS through compliance with Shareable Content Object Reference Model (SCORM) standards and readily accessible through mobile devices. 7

9 In addition, an increasing number of our clients have their own LMS platforms and only need our learning content. We are therefore placing greater focus on refreshing and modernising our most popular courses. Consistent with guidance, revenue was flat compared with the prior year. However, EBITDA was up 16.8% as a result of efficiency initiatives and the benefit of the weaker Australian dollar. A stronger performance is expected in the second-half. Assurance Services The Assurance Services division achieved revenue growth of 3.9%, of which 1.1% was due to more favourable foreign exchange rates. This reflected a mixed performance across our key markets. Asia delivered double digit growth as we saw continued growth in our Food business and success in our specialist programmes in Aerospace and Automotive. EMEA delivered high mid-single digit growth as our Food business continued to grow strongly. The Americas region also had a robust first-half with revenues up in the high-mid single digits. This reflected a solid performance across both the traditional management systems certification business and our emerging Food business. Our mature Australian business saw a decline in revenues as a result of some client losses in early 2014 but this situation has now been stabilised and an improved performance is expected in the second-half. EBITDA was up 24.3% reflecting the benefit of the efficiency improvement initiatives, particularly in Australia, which were implemented in the second-half of FY14. EBITDA margins improved from 15.0% to 18.0%. We have continued to roll out our global back office operational platform with parts of the EMEA business going live on the system during the first-half. With both Australia and Asia already completed we are now over half way through the roll out and we will continue to progress the implementation in EMEA before completing the global roll out in Americas during FY16. This is expected to drive further operational efficiencies. In July 2014 we acquired the business of OCICERT Mexico SA de CV. This acquisition adds scale to our existing management system business in Mexico and will help us to better serve global client in Latin America. Revenue, EBITDA and EBITDA margins are all expected to grow in the secondhalf. Property Services SAI Global Property provides an information brokerage service to conveyancers and banks, together with outsourced mortgage services workflow solutions for financial institutions. The Property business achieved revenue growth of 3.3% (8.2% if the authority fee 1 pass through component of revenue is excluded) and EBITDA growth of 29.5%. EBITDA margins increased by 3.5% to 17.5% compared to the previous corresponding period. This strong performance has been driven by the continued buoyant real estate market; the full impact of recent new business wins from HSBC, Bankwest WA and CBA WA; and continued efficiency initiatives in our operations. 1. Fees paid by SAI to the providers of certificates which forms part of the price charged by SAI to its customers 8

10 In late October 2014, the Property Division acquired the exclusive licence to the Encompass software in Australia which it sold previously under a revenue sharing agreement. In the second-half, this will be launched in conjunction with a new bundled report, which will combine the strength of Search Manager with the Encompass platform, to deliver a unique Company Dynamic Report to the market. This Information Brokerage initiative is Property s first foray into the lucrative value-added content market with the objective of winning market share from existing participants. Settlement Room was launched during the first-half which enables Conveyancing Manager clients and banks to electronically validate and track bank settlement details prior to a manual settlement. Feedback from clients has been positive, with 30% take-up by the market to date. Settlement Room will also be the platform that facilitates an electronic settlement with a direct link to PEXA (Property Exchange Australia). We support the concept of electronic conveyancing and SAI Global is a Sponsor of the PEXA system. When PEXA has defined the interface protocols to their system, we will build an interface to PEXA from our electronic Settlement Room which was launched late last year. We believe that the Settlement Room product together with PEXA offer a great opportunity to assist our major banking and solicitor clients to navigate through the complexity of the dual electronic and manual processing world that will confront our clients in the future. Corporate Services The increase in Corporate Services costs relates to information technology initiatives, including the implementation of recommendations from the Capgemini information technology review, increases in the non-cash charge for equity based remuneration and the impact of the weaker Australian dollar. The structure of the IT function globally is currently undergoing a review with the aim of significantly reducing costs under a more integrated operating model. Implementing the model is a key priority for Malcolm Pascoe following his recent appointment to the position of Group Chief Information Officer. Corporate Services costs are expected to be lower in the second-half. Capital Management The Group finished the period with cash balances of $58.2 million, interestbearing debt of $272.0 million and shareholders funds of $375.6 million. The gearing ratio as at 31 December 2014 was 36.3%, down from 36.9% at 30 June Where practicable, the debt component of acquisition funding is denominated in the currency of the jurisdiction in which the acquisition predominantly resides, thereby providing a natural hedge against currency movements. The Group does not undertake hedging activities in relation to its projected foreign currency earnings. In December 2014 the Company extended the tenure of its existing syndicated bank facilities on improved terms. The maturity dates of two of the Company s three tranches, those maturing in December 2015 and December 2016, were extended to January 2019 and January 2020 respectively. 9

11 Matters subsequent to the end of the half-year Other than matters referred to previously in this report, the Directors are not aware of any matter or circumstance which has arisen that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years. Auditor s independence declaration A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 11. Rounding of amounts to nearest thousand dollars The Company is a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the Directors Report and financial report. Amounts in the Directors Report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order. This report is made in accordance with a resolution of the Directors. Andrew Dutton Chairman Peter Mullins Chief Executive Officer 26 February

12 Ernst & Young 680 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: Fax: ey.com/au Auditor s Independence Declaration to the Directors of SAI Global Limited In relation to our review of the financial report of SAI Global Limited for the half-year ended 31 December 2014, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Christopher George Partner 26 February 2015 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

13 Consolidated statements of comprehensive income for the half-year ended 31 December 2014 Note Half-Year Consolidated Revenue 268, ,944 Other income , ,032 Share of net gains of investments accounted for using the equity method Expenses Employee benefits expense 3 92,646 91,301 Depreciation and amortisation expense 3 18,100 17,506 Finance costs 3 5,793 6,212 Other expenses 3 125, , , ,302 Profit for the half-year before income tax expense 27,382 24,817 Income tax expense 4 7,667 6,660 Net profit for the half-year after income tax expense 19,715 18,157 Other comprehensive income Items that may be reclassified subsequently to profit or loss Net movement on cash flow hedges Income tax effect (35) (98) Exchange differences on translation of foreign operations 25,857 11,373 Income tax effect ,857 11,373 Items that may not be reclassified subsequently to profit or loss Change in minimum funding requirement on closure of defined benefit plan (12) (1,744) Income tax effect (12) (1,278) Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year 26,254 10,331 45,969 28,488 Profit for the half-year is attributable to: Owners of SAI Global Limited 19,530 18,043 Non-controlling interests ,715 18,157 Total comprehensive income for the half-year is attributable to: Owners of SAI Global Limited 45,784 28,374 Non-controlling interests ,969 28,488 Earnings per share attributable to the ordinary owners of the Company: Basic (cents per share) Diluted (cents per share) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 12

14 Consolidated statements of financial position as at 31 December 2014 Note Consolidated 31-Dec Jun-14 ASSETS Current assets Cash and cash equivalents 5 58,197 67,730 Trade and other receivables 124, ,523 Current tax receivable 2,152 7,426 Inventories Total current assets 185, ,209 Non-current assets Investments accounted for using the equity method 1,085 1,079 Plant and equipment 1 58,110 56,707 Deferred tax assets 21,721 20,777 Intangible assets 9 556, ,471 Total non-current assets 637, ,034 Total assets 822, ,243 LIABILITIES Current liabilities Trade and other payables 6 133, ,992 Current tax liabilities 3,685 7,428 Provisions 5,076 5,323 Total current liabilities 142, ,743 Non-current liabilities Borrowings 2 269, ,367 Deferred tax liabilities 26,393 25,540 Provisions 3,728 3,865 Derivative financial instruments 2,282 2,660 Retirement benefit obligations 2,636 2,413 Total non-current liabilities 304, ,845 Total liabilities 447, ,588 Net assets 375, ,655 EQUITY Contributed equity , ,977 Reserves 7 (29,712) (56,205) Retained profits 1,190 (376) Capital and reserves attributable to the ordinary owners of SAI Global Limited 374, ,396 Non-controlling interests 1,444 1,259 Total equity 375, ,655 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 1 Plant and equipment consists of internally generated intellectual property, IT equipment, software, leasehold improvements and furniture and fittings. 2 Non-current borrowings is net of $2.242M of facility establishment costs (30 June 2014: $1.427M). 13

15 Consolidated statements of changes in equity for the half-year ended 31 December 2014 Half-Year Consolidated Attributable to owners of SAI Global Limited Contributed Reserves Retained Equity earnings Non-controlling interests Total Balance at 1 July ,977 (56,205) (376) 1, ,655 Profit for the half-year , ,715 Other comprehensive income Total comprehensive income for the half-year - 26,266 (12) - 26,254-26,266 19, ,969 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Dividends paid 2, , (17,952) - (17,952) Movement in share based payments reserve Acquisition of non-controlling interest Balance at 31 December ,631 (29,712) 1,190 1, ,553 Balance at 1 July ,225 (56,465) (2,567) 1, ,378 Profit for the half year , ,157 Other comprehensive income - 11,609 (1,278) - 10,331 Total comprehensive income for the half-year - 11,609 16, ,488 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Dividends paid 3, , (17,190) (29) (17,219) Movement in share based payments reserve Acquisition of non-controlling interest - (256) - (34) (290) Balance at 31 December ,901 (44,159) (2,992) 1, ,986 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 14

16 Consolidated statements of cash flows for the half-year ended 31 December 2014 Half-Year Note Consolidated Cash flows from operating activities Receipts from customers 288, ,231 Payments to suppliers and employees (242,073) (240,772) Interest received Interest paid (5,793) (6,212) Income taxes paid (9,672) (4,748) 31,484 38,869 Cash outflow impact of significant charges 1 (6,936) (2,545) Net cash inflow from operating activities 24,548 36,324 Cash flows from investing activities Payments for purchase of controlled entities (net of cash acquired) Payment for Encompass rights Payments for product development Payments for plant and equipment 2 Payments for capital work-in-progress Net cash outflow from investing activities (2,789) (1,906) (8,000) - (5,940) (2,511) (3,374) (3,790) (2,673) (5,378) (22,776) (13,585) Cash flows from financing activities Proceeds from issue of shares Payments for shares (555) (1,584) Dividends paid (15,032) (13,175) Net cash outflow from financing activities (15,424) (14,144) Net increase/(decrease) in cash and cash equivalents (13,652) 8,595 Cash and cash equivalents at the beginning of the financial period 67,730 64,048 Effects of exchange rate changes on cash and cash equivalents 4, Cash and cash equivalents at the end of the half-year 5 58,197 73,021 1 Cash outflow impact of significant charges is comprised of: Accounting, legal, tax, advisory and other incidental costs incurred in responding to the unsolicited, conditional and non-binding approach and subsequent process (4,541) (42) Operational efficiency initiatives (consulting fees, terminations and office rationalisation) (2,294) (1,713) Incidental charges relating to acquisitions (101) (790) Cash outflow impact of significant charges (6,936) (2,545) The above statement of cash flows should be read in conjunction with the accompanying notes. 2 Plant and equipment consists of internally generated intellectual property, IT equipment, software, leasehold improvements and furniture and fittings. 15

17 Notes to the financial statements 31 December 2014 Contents of the notes to the financial statements Page 1 Summary of significant accounting policies 17 2 Segment information 19 3 Expenses 21 4 Income tax expense 22 5 Current assets - Cash assets and cash equivalents 23 6 Current liabilities - Trade and other payables 23 7 Reserves 23 8 Dividends 24 9 Non-current assets - Intangible assets Financial instruments Contributed equity Earnings per share Events occurring after the balance sheet date 28 16

18 Notes to the financial statements 31 December 2014 Corporate Information The consolidated financial statements of SAI Global Limited and its subsidiaries (collectively, the Group) for the half year ended 31 December 2014 were authorised for issue in accordance with a resolution of the directors on 26 February SAI Global is a for profit company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded. Note 1. Summary of significant accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of SAI Global Limited and its subsidaries. Basis of preparation of half-year report This general purpose condensed financial report for the half-year reporting period ended 31 December 2014 has been prepared in accordance with Acccounting Standard AASB 134 Interim Financial Reporting and the Corporations Act The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full a disclosure of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report. It is recommended that the half-year financial report be read in conjunction with the annual report for the year ended 30 June 2014 and considered together with any public announcements made by SAI Global Limited during the half year ended 31 December 2014 in accordance with the continuous disclosure obligations of the ASX listing rules. Apart from the changes in accounting policies noted below, the accounting policies and methods of computation are the same as those adopted in the most recent annual financial report. Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Australian dollars, which is SAI Global Limited s functional and presentation currency. Segment Information As explained in note 2, in recognition of the fact that the Property Services business is now managed and reported internally as a separate business, distinct from the Standards and Technical Information business, these two businesses have been reported as separate business segments. In prior periods these businesses jointly formed, and were reported as, the Information Services division. Prior period comparatives have been restated to reflect the disclosure adopted in the current period. New Acccounting Standards and Intepretations (a) Changes in accounting policy The following amendments to Standards have been adopted from 1 July Adoption of these amendments did not have any material effect on the financial position or performance of the Group: (i) AASB : Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (applicable for annual reporting periods commencing on or after 1 January 2014) AASB adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement. (ii) AASB 1031: Materiality (applicable for annual reporting periods commencing on or after 1 January 2014) The revised AASB 1031 is an interim standard that cross-references to other Standards and the Framework (issued December 2013) that contain guidance on materiality. AASB 1031 will be withdrawn when references to AASB 1031 in all Standards and Interpretations have been removed. AASB Part C issued in June 2014 makes amendments to eight Australian Accounting Standards to delete their references to AASB The amendments are effective from 1 July

19 Notes to the financial statements (continued) 31 December 2014 New accounting standards and AASB Interpretations (continued) (iii) AASB : Amendments to Australian Accounting Standards Conceptual Framework, Materiality and Financial Instrument (applicable for annual reporting periods commencing on or after 1 January 2014) The Standard contains three main parts and makes amendments to a number of Standards and Interpretations. Part A of AASB makes consequential amendments arising from the issuance of AASB CF Part B makes amendments to particular Australian Accounting Standards to delete references to AASB 1031 and also makes minor editorial amendments to various other standards. Part C makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6 Hedge Accounting into AASB 9 Financial Instruments. 18

20 Notes to the consolidated financial statements 31 December 2014 Note 2. Segment information The segment information provided to the Board and Executive Committee for the half-year ended 31 December 2014 is as follows: Half-year ended 31 December 2014 Property Services 1 Standards & Technical Information 1 Compliance Services Assurance Services Corporate Services Eliminations Consolidated s s s s s s s Sales revenue 86,878 38,309 46,530 98,511 - (1,789) 268,439 Other income (156) Segment revenue 86,898 38,479 46,374 98,834 3 (1,789) 268,799 Less: direct costs (59,222) (9,587) (10,074) (48,293) (101) 1,789 (125,488) Gross margin 27,676 28,892 36,300 50,541 (98) - 143,311 Less: overheads (11,013) (7,416) (19,463) (29,586) (17,133) - (84,611) Less: corporate allocations 2 (1,448) (1,228) (1,881) (3,230) 7, Segment earnings before interest, tax, depreciation and amortisation (EBITDA), before significant charges Less: depreciation Less: amortisation of intangible assets Share of net profits of associates and joint venture partnership accounted for using the equity method 15,215 20,248 14,956 17,725 (9,444) - 58,700 (2,722) (541) (4,436) (2,225) (2,462) - (12,386) (293) (1,233) (3,499) (689) - - (5,714) 12,200 18,474 7,021 14,811 (11,906) - 40, Segment result before significant charges 12,200 18,474 7,021 14,939 (11,906) - 40,728 a) Reconciliation of segment revenue Segment revenue 268,799 Interest income 70 Total revenue 268,869 b) Reconciliation of segment result Segment result before significant charges 40,728 Significant charges: Accounting, legal, tax, advisory and other incidental costs incurred in responding to the unsolicited, conditional and non-binding approach and subsequent process (5,228) Operational efficiency initiatives (consulting fees, terminations and office rationalisation) (2,294) Incidental charges relating to acquisitions (101) Total significant charges (7,623) Interest income 70 Interest expense (5,793) Profit for the period before income tax expense 27,382 1 In recognition of the fact that the Property Services business is now managed and reported internally as a separate business, distinct from the Standards and Technical Information business, these two businesses have been reported as separate business segments. In prior periods these businesses jointly formed, and were reported as, the Information Services division. Prior period comparatives have been restated to reflect the disclosure adopted in the current period. 2 Costs allocated by Corporate to the business segments reflect the services provided by Corporate to each segment. If not provided by Corporate the business segments would need to source these services externally. The costs are predominately related to the provision of IT, HR and Finance support services. 19

21 Notes to the consolidated financial statements 31 December 2014 Note 2. Segment information (continued) The segment information provided to the Board and Executive Committee for the half-year ended 31 December 2013 is as follows: Half-year ended 31 December 2013 Property Services 1 Standards & Technical Information 1 Compliance Services Assurance Services Corporate Services Eliminations Consolidated s s s s s s s Sales revenue 84,068 38,219 46,861 94,833 - (1,037) 262,944 Other income 67 (163) (127) (44) (15) - (282) Segment revenue 84,135 38,056 46,734 94,789 (15) (1,037) 262,662 Less: direct costs (59,671) (11,113) (10,868) (47,085) (60) 1,037 (127,760) Gross margin 24,464 26,943 35,866 47,704 (75) - 134,902 Less: overheads (11,188) (5,944) (21,074) (30,058) (14,969) - (83,233) Less: corporate allocations 2 (1,526) (1,314) (1,987) (3,385) 8, Segment earnings before interest, tax, depreciation and amortisation (EBITDA) 11,750 19,685 12,805 14,261 (6,832) - 51,669 Less: depreciation (2,539) (580) (4,014) (1,996) (2,267) - (11,396) Less: amortisation of intangible assets (316) (1,263) (3,580) (951) - - (6,110) 8,895 17,842 5,211 11,314 (9,099) - 34,163 Share of net profits of associates and joint venture partnership accounted for using the equity method Segment result before significant charges 8,895 17,842 5,211 11,401 (9,099) - 34,250 a) Reconciliation of segment revenue Segment revenue - 262,662 Interest income 370 Total revenue 263,032 b) Reconciliation of segment result Segment result before significant charges 34,250 Significant charges: Acquisiton related transaction charges (42) Integration and restructuring charges (2,018) Closure of Canadian defined benefit pension plan (741) IT governance review (790) Total significant charges (3,591) Interest income 370 Interest expense (6,212) Profit for the period before income tax expense 24,817 1 In recognition of the fact that the Property Services business is now managed and reported internally as a separate business, distinct from the Standards and Technical Information business, these two businesses have been reported as separate business segments. In prior periods these businesses jointly formed, and were reported as, the Information Services division. Prior period comparatives have been restated to reflect the disclosure adopted in the current period. 2 Costs allocated by Corporate to the business segments reflect the services provided by Corporate to each segment. If not provided by Corporate the business segments would need to source these services externally. The costs are predominately related to the provision of IT, HR and Finance support services. 20

22 Notes to the financial statements (continued) 31 December 2014 Note 3. Other expenses Profit for the half-year before income tax expense includes the following expenses: Half-Year Consolidated Other expenses Cost of providing services 44,385 46,026 Property service disbursements 43,421 44,276 Administration costs 14,581 9,320 Promotional costs 2,072 2,068 Lease costs 8,437 9,352 Other expenses 12,180 12,241 Total other expenses (including significant charges of $6,524,000 1 ) 125, ,283 Employee benefits expense (including significant charges of $1,099,000 1 ) 92,646 91,301 Depreciation of plant and equipment 12,386 11,396 Amortisation: Publishing licence agreement Customer relationships and contracts 2,344 3,001 Product delivery platforms 1, Intellectual property 1,470 1,318 Encompass rights 68 - Total amortisation 5,714 6,110 Total depreciation and amortisation 18,100 17,506 Other expenses: Accounts receivable impairment expense 1, , Finance costs: Interest and finance charges paid/payable 5,793 6,212 5,793 6,212 1 Significant charges is comprised of: Accounting, legal, tax, advisory and other incidental costs incurred in responding to the unsolicited, conditional and non-binding approach and subsequent process 5, Operational efficiency initiatives (consulting fees, terminations and office rationalisation) 2,294 2,018 Incidental charges relating to acquisitions Total significant charges 7,623 3,591 21

23 Notes to the financial statements (continued) 31 December 2014 Note 4. Income tax expense Half-Year Consolidated (a) Income tax expense Current tax 9,309 9,510 Deferred tax (1,599) (2,625) Under/(over)provision from prior year (43) (225) 7,667 6,660 Deferred income tax expense/(income) included in income tax expense comprises: Decrease/(increase) in deferred tax assets 1,926 (1,439) (Decrease)/increase in deferred tax liabilities (3,525) (1,186) (1,599) (2,625) (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax expense 27,382 24,817 Tax at the Australian income tax rate of 30% ( %) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income 8,215 7,445 (716) (720) 7,499 6,725 Under/(over)provision from prior year (43) (224) Tax effect of different foreign tax rates and other adjustments Income tax expense 7,667 6,660 Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity Net deferred tax - (credited) directly to equity 266 1, ,724 (c) Tax losses Unused tax losses for which no deferred tax asset has been recognised 1,419 1,041 Potential benefit at US tax rate of 39% (d) Tax consolidation legislation SAI Global Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July The entities in the tax consolidated group have entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, SAI Global Limited. The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate SAI Global Limited for any current tax payable assumed and are compensated by SAI Global Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to SAI Global Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities' financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of the financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax installments. The funding amounts are recognised as current intercompany receivables or payables. 22

24 Notes to the financial statements (continued) 31 December 2014 Note 5. Current assets - Cash assets and cash equivalents Half-Year Consolidated 31-Dec Jun-14 Cash at bank and on hand 52,574 66,145 Deposits at call 5,623 1,585 58,197 67,730 As at 31 December 2014 $0.5M (June 2014: $1.7M) of the cash and cash equivalents balance is held in trust in the SAI Global Limited Employee Share Purchase Plan. There are no restrictions on the availability or use of the remaining cash balances. Note 6. Current liabilities - Trade and other payables Trade payables 17,129 25,455 Accrued expenses 42,465 48,284 Deferred revenue 73,941 72, , ,992 Due to the short-term nature of these payables, their carrying value is considered to approximate their fair value. Note 7. Reserves (a) Reserves Share-based payments reserve 8,627 8,400 Foreign currency translation reserve (15,617) (41,474) Hedging reserve - Cash flow hedges (3,251) (3,660) Transactions with non-controlling interests (19,471) (19,471) (29,712) (56,205) (b) Nature and purpose of reserves: Share-based payments reserve The share-based payments reserve is used to recognise the fair value at grant date of performance share rights and options issued over the relevant vesting period. Foreign currency translation reserve Exchange differences arising on translation of foreign controlled entities are taken to the foreign currency translation reserve. The reserve is recognised in the statement of comprehensive income when the net investment is no longer controlled. Hedging reserve - Cash flow hedges The hedging reserve accumulates the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges. Transactions with non-controlling interests Accounting Standard AASB127, Consolidated and Separate Financial Statements, was revised with effect from 1 July Under the revised Standard, transactions with non-controlling interests which do not result in a loss of control must be treated as an equity transaction. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid is now recognised directly in equity and not taken to goodwill. 23