Interim Results 2004 Presentation 26 February 2004 1
Market Overview and Financial Results Tom Honan Chief Financial Officer 2
Summary of Results Net operating profit after tax (excluding outside equity interests) of $42.4m, up 986%. Half year total revenues (excluding proceeds on sale of UK premises) of $394.5m, up 13% or up 7% excluding recent acquisitions. Half year operating costs excluding the effect of recent acquisitions and excluding cost of sales was $233.9, down 5%. EBITDA (excluding non recurring items) $80.1m, up 47% Basic Earnings per Share 7.05 cents per share Interim Dividend payable of 3 cents (fully franked), 20% increase. 3
Context of Results 1H 04 EBITDA up significantly from last year. Revenues reflect improved market conditions (especially Asia Pacific) and the contribution from acquisitions. Operating costs reflect cost savings from restructuring and continued focus on cost control. Capital expenditure of $7.2m (down 37%.) DSO 63 days, down 4 days from 30 June 2003. Increased non registry revenues due to acquisition of Georgeson Shareholder Communications Inc. 4
This presentation is structured around the following framework Market Overview Financial Results CEO s Report 5
CPU Revenues are driven by multiple factors Market Overview Revenue type Revenue Driver Risk mitigation 26% 4% 54% Register Maint & Recoveries Corporate Actions Growth in clients and holders Market conditions, M&A activity Retain existing clients, win market share Win new business; link to key stakeholders, clients 7% 9% Margin Income Interest rates, hedging balances Hedging, flow on effort from Maintenance & Corp Actions Register Maint. & Recoveries Margin Income Other Corporate Actions Non Registry(incl GSC) Non- Registry (includes Georgesons) Growth in nonregistry businesses, clients & proxy solicitation Increase proportion on non-registry businesses, win market share & new business 6
Global Equities Market Market Overview M&A Value of Transactions (US$m) Historical Equity Issuance Data M&A Number of Transactions Annual M&A Book to Bill Ratio 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1H92 2H92 1H93 2H93 1H94 2H94 1H95 2H95 1H96 2H96 1H97 2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01 1H02 2H02 1H03 2H03 M&A Value of Transactions (US$m) Source: SDC Thomson Financial M&A Number of Transactions 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Book-to-bill ratio Average 2003 YTD 1.17x 2003 YTD vs. 2000-2002 Avg 34.5% 2000-2002 Average 0.87x 2003 YTD vs. 1991-2002 Avg. 7.1% 1991-2002 Average 1.10x Positive for first time in four years. CPU impact mainly felt in Australia and Hong Kong. 7
Global Interest Rate Market Market Overview % UK % US 8 8 6 6 4 4 2 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 % 8 Canada 6 4 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 8
Market Overview Financial Results CEO s Report 9
Group Financial Performance AUD $m s Financial Results Revenue 1H 04 1H 03 %Difference Registry maintenance 165.7 168.0 (1%) Corporate actions 34.4 21.8 58% Margin income (including sharesave admin) 26.6 31.9 (17%) Non Registry fees/sales 101.5 71.4 42% Recoveries 50.0 49.3 1% Interest income 1.7 1.8 (6%) Other 14.6 4.5 224% Total Revenue 394.5 348.7 13% Operating costs 312.9 293.8 (7%) Share of losses of associates 1.5 0.5 (200%) EBITDA 80.1 54.4 47% Depreciation and amortisation 14.5 15.4 6% Amortisation of goodwill 13.5 16.2 17% Borrowing costs 3.8 3.8 0% Other 0.0 (2.0) NA Non-recurring items (5.7) 7.1 NA Pre tax Profit 54.0 13.9 289% Income tax 11.2 9.0 24% NPAT before OEI 42.8 4.8 792% NPAT after OEI 42.4 3.9 986% 10
Half Year Comparisons Financial Results $AUDm Revenue Breakdown $AUDm 168.0 166.0 165.7 396.5 384.5 348.7 359.9 394.5 ** 101.5 71.4 74.2 73.0 74.6 54.4 79.5 80.1 21.8 21.8 34.4 31.9 31.8 26.6 1H'02 2H'02 1H'03 2H'03 1H'04 Revenue EBITDA Register Main Corp Actions Margin Income Non Registry Sales/Fees 1H'03 2H'03 1H'04 * * Non registry sales/fees includes income from Georgesons ** Excludes proceeds on the sale of Pavilions 11
Revenue Analysis Financial Results Total Revenue $AUDm Revenue Breakdown 37%* 34% 52.1 57.4 56.2 49.7 22.9 28.6 23.3 29% Asia Pacific Europe North America 16.6 6.2 11.6 12.9 12.1 1.6 13.1 13.9 *includes revenues from Georgesons. Register Main Corp Actions Margin Income Recoveries Non Registry Sales/Fees Asia Pacific Europe North America * *Non registry sales/fees includes revenues from Georgesons. 12
Cost Analysis Financial Results $AUDm Operating Costs $AUDm Operating Cost Breakdown 323.5 309.9 293.8 278.9 312.9 * 136.5 133.5 139.3 49.7 54.6 62.2 40.6 36.7 40.4 42.1 41.6 18.0 18.8 19.3 25.9 8.6 4.0 13.9 1H'02 2H'02 1H'03 2H'03 1H'04 Recov Exp Personnel Occupancy Other Direct Technology Corporate * Includes Georgeson costs. Excludes book value of Pavilions 1H'03 2H'03 1H'04 13
EBITDA generated from diversified portfolio Financial Results $AUDm Total EBITDA 73.0 74.6 79.5 80.1 * EBITDA Breakdown FY 2003 54.4 39% 39% 22% 1H'02 2H'02 1H'03 2H'03 1H'04 Asia Pacific Europe North America * Excludes non recurring items 14
Progress on cost savings Financial Results Personnel Expected Annualised Savings 21.2 1H 04 Realised Savings 9.3 2H 04 Expected Savings 9.0 Savings Excess/ (Shortfall) (2.9) Property 0.3 0.1 0.4 0.2 Other 1.2 0.0 1.9 0.7 Total 22.7 9.4 11.3 (2.0) 15
Personnel Cost Control Financial Results Personnel Costs 2H FY03 UK Mgt Team $161.4 $0.5 Oz Mkt Recovery $4.5 Salary Increase $5.6 Acquisitions Restructuring $6.4 ($9.3) A$m 1H FY04 $169.1 150 155 160 165 170 175 180 185 Half Year Comparison 16
Analysis of NPAT Financial Results $AUDm 50 40 Actual NPAT 30 20 33.4 42.4 10 0 24.5 12.4 3.9 1H'02 2H'02 1H'03 2H'03 1H'04 Note: Normalised NPAT for 1H 03 = 13.2, 2H 03 = 32.7 17
Returns Improving, Cost of Capital Declining Financial Results 14% ROIC vs WACC 12% ROIC WACC 10% 8% Jun '02 Dec '02 Jun '03 Dec '03 Rolling 12 month period 18
Effective Tax Rate Financial Results Headline effective tax rate 1H 04: 20.8% (1H 03: 65.2%) Normalised headline effective tax rate 1H 04: 31.7% (1H 03: 30.3%) The underlying effective tax rate being the tax rate adjusted for one off, nonrecurring items and non-deductible goodwill charges for the 1H 04 is 27.7% (1H 03: 10.6%) 19
Headcount (excluding Georgeson) Financial Results Total FTE's 5,000 4,966 5,321 5,029 5,079 4,300 4,000 3,000 2,591 2,000 2,053 1,000 0 June '98 June '99 June '00 June '01 June '02 June '03 Dec '03 20
Headcount* Financial Results Geographic Breakdown 1,200 1,102 1,113 1,000 892 800 600 522 524 400 200 150 73 79 0 Australia Hong Kong New Zealand UK Ireland S. Africa US Canada * Headcount excludes Technology, Corporate Services and Georgesons. 21
Technology Costs Establishing Global Platform Financial Results 50 45 40 35 30 25 20 15 10 5 0 40.4 42.1 41.6 1H'03 2H'03 1H'04 All AUD $m internal cash costs only All technology costs are expensed Major events: Acquisition of EFA assets February 2003 22
Analysis of Technology Costs Financial Results Category Cost Type 2% 3% 2% 8% 5% 3% 30% 42% External bureau Computer Costs Development Infrastructure Maintenance External bureau Admin 23% 82% Comms Occupancy Personnel & on-costs 23
Analysis of Technology Costs Financial Results $AUD 50.0 40.0 8.0 8.6 1.5 8.0 1.0 9.6 30.0 20.0 12.7 1.3 12.1 1.3 12.7 1.3 External Bureau Infrastructure Maintenance Application Maintenance Administration Development 10.0 17.8 20.8 18.0 0.0 1H'03 2H'03 1H'04 24
Balance Sheet Strength Financial Results Net Debt / Equity = 25.7% Net Debt = AUD $157.9m Committed Debt facility = AUD $360m Net Debt / Equity has increased as a result of business acquisitions. 25
Cash Flow Financial Results $AUDm 70.0 60.0 51.6 50.0 40.0 30.0 28.5 27.8 28.4 33.1 43.1 42.6 Gearing on a net debt to equity basis 25.7% Committed debt facility - A$360m Debtors days outstanding have fallen from 67 to 63 days 20.0 10.0 11.5 6.3 7.2 0.0 1H'02 2H'02 1H'03 2H'03 1H'04 Cashflow from Ops Cap Ex - PPE 26
Capital Expenditure down 37% on 1H 03 Financial Results Occupancy CPU Group Capex AUD $m 0.4 Document Services Facilities 0.7 Information Technology 5.9 Other 0.2 TOTAL 7.2 27
Working Capital Management Improving Financial Results 80 70 75 70 67 63 60 52 51 50 40 41 45 Receivable days Payable days 30 20 10 0 days FY'01 FY'02 FY'03 1H'04 28
Interest Rate Sensitivity Financial Results A$m PBT Impact 100 80 60 40 20 0-2.50% -2.00% -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% -20-40 -60 Exposure Hedged exposure 100% Hedged 29
Risk Management Average Funds Balances for six months ending 31 December 2003 Financial Results By Category By Country Dividend 16% Sharesave 20% US 10% Australia 2% Dissenter 9% Corporate Actions 15% Broker Trust 23% UK 40% Canada 48% Regular Trust 17% Balance range A$2.7b to A$5.3b Average fund balance A$2.9b 30
Risk Management Interest Rate Sensitivity Financial Results Exposure to interest rates 25% Effective hedging in place - both natural & synthetic 41% No exposure 34% Interest Rate Hedging Strategy: - Minimise downside risk in current low interest rate environment Policy: - Minimum hedge of 25% / Maximum hedge of 75% - Minimum term 1 year / Maximum term 5 years - Current hedging: 41% 31
Equity Management Fully Franked Interim Dividend of 3cps Financial Results EPS Basic EPS Normalised Basic Dividend 7.05 cents 6.00 cents 6 cents per year (fully franked) Current yield * 1.71% Franking Benefit Total return 2.4% * Based on share price of AUD $3.50 32
Equity Management Share Buy Back: Reset Preference Shares Financial Results Announced 19 th December 2003. Buy back a maximum of 17% (250,000 preference shares). Commenced 5th January 2004 Acquired 145,528 preference shares (9.7% of total issued) Average price AUD $103.63 Scheduled to complete 5 th July 2004 33
Financial Summary Financial Results Improved EBITDA reflecting: Market conditions especially in Australia and Hong Kong. Benefits of restructuring. Contribution from acquisitions. Corporate activity increased. Market activity level still low in North America and Europe. Cost savings realised. Margin income still declining due to rate pressure. Capex down 37% on last year. Improved working capital. 20% increase to dividend. 34
Market Overview Financial Results CEO s Report 35
CEO s Report For The Six Months to 31 December 2003 Chris Morris Chief Executive Officer 36
What has turned the business around? CEO s Report Improved market conditions. Significant improvement in financial reporting so we know where our costs are. Ongoing focus on cost control. New Time Zone structure and focus on P&L at all levels. Changes to management. Our core technology systems in all locations. The most significant factor is 37
Our People CEO s Report Global comparison of results from Aug to Nov 03 survey % 200 180 160 140 120 100 80 60 40 20 0 Percentage change in the number of staff who thought that Computershare had improved over a 3 month period +30% +138% +35% Australia Canada Hong Kong +60% Ireland +30% New Zealand +715% +405% South Africa UK +25% USA 38
Regional Reports - EMEA CEO s Report General market conditions remain flat. Significantly growing ancillary businesses in the UK including: Small Shareholder Programs. Tracing unclaimed beneficiaries. Dealing Services. Creating new business opportunities in the UK. NHS Foundation Trust Hospitals (Government preferred supplier status). South Africa significant turnaround from FY 03 loss of $6 million to 1H 03 profit of $1 million and expected to be even better in 2H 04. Moving to increase market share in Russia. Computershare Germany provides a solid base to expand our services into continental Europe. 39
Regional Reports Asia Pacific CEO s Report Significant increase in general market activity. 40
CEO s Report NUMBER OF IPO'S WON BREAKDOWN BY SHARE REGISTRY 2003 Share Registry Number % Computershare 45 46.90% Security Transfers 15 15.60% APRL 12 12.50% Registries Ltd Advanced Share Registry 8 8 8.30% 8.30% Computershare APRL Registries Ltd Pitcher Partners Other 8 0 8.30% 0.00% Security Transfers Advanced Share Registry Pitcher Partners Total 96 100.0% TOTAL CAPITAL RAISED ($) - BREAKDOWN BY SHARE REGISTRY 2003 Share Registry Value Computershare $5,407,200,000 % 59.40% APRL $3,277,800,000 36.00% Registries Ltd $227,500,000 2.50% Security Transfers $69,700,000 0.80% Pitcher Partners Advanced Share Registry Other $77,300,000 $44,500,000 $0 0.80% 0.50% 0.00% Computershare APRL Registries Ltd Security Transfers Adv anced Share Registry Pitcher Partners Total $9,104,000,000 100.0% Source: Australian Financial Review 41
Regional Reports Asia Pacific cont. CEO s Report Significant increase in general market activity. Won the registry tender for IAG adding more than 1 million shareholders. Plans business in Australia grew by 21%. Hong Kong improved results and maintaining share of IPO s coming to the market. India places us in strategically important growth area in Asia. 42
Regional Reports - North America CEO s Report Georgeson acquisition has added strength to CPU brand resulting in increased invitations to tender from S&P Top 100. Winning business in the US (Florida Power, Reliant Resources, Viceroy Resources, Stanley Tool Works). Plans voted No 1 in recent service quality survey. Transcentive acquisition creating additional opportunities for cross-sell. Canada providing improved results particularly in Corporate Trust. 43
Acquisitions Georgeson Shareholder Communications CEO s Report Our most significant acquisition to date. All Georgeson s businesses are undergoing careful analysis. Great fit into Pepper and Analytics businesses. In other CPU markets, we can expose existing CPU clients to GS services. There will be a natural flow into our existing dealing services. 44
Acquisitions Georgeson Shareholder Communications cont. CEO s Report Integration being carefully managed through a dedicated team of top CPU and Georgeson executives. Already identified areas for significant cost savings. Some outsourced operations will be brought back in-house with significant savings. IT Infrastructure. Administrative functions. Office rationalisation. Our back-end processing expertise will reduce the cost of major transactions. Revenues have been around US$120 million and expect these to grow in line with increases in market activity. Margins will be around 20% excluding cost savings. 45
Acquisitions - Transcentive CEO s Report Specialist providers of services for all types of equity plans. Acquisition blends well into CPU s overall Plans business strategy and cements our position as the leading provider of Plans services globally and in the US in particular. Services range from bureau to full outsource. Strong market presence in the US 48% of Fortune 1000 companies. CPU will be able to leverage off US base and take their services to another level both nationally and internationally. Further opportunities to cross-sell clients. 46
Acquisitions Transcentive cont. CEO s Report Integration will be carefully managed and synergies between our two companies are expected to be extracted from: Administration Merging of outsourcing with CPU Plan Managers Integration of Sales and Marketing functions Technology expense (for both parties). Creates immediate global opportunities Hong Kong India Europe South Africa. 47
Acquisitions - India CEO s Report Places Computershare in strategically important, future growth area in Asia. Mutual Funds back office market (30% market share) opportunities to expand overseas. Market leader in share registry with 40% market share 16 million shareholders. Potential to leverage CPU s value-added services, to grow market share. Ability to partner with Indian companies as they move into international markets (ADR s, overseas companies with employees in India). Appointed our own Chief Financial Officer. 48
Acquisitions Deutsche Borse Computershare GMBH (JV) CEO s Report Have purchased remaining 51% and now trading as Computershare Germany. Dramatically reduced cost base. Moved operations to Pepper in Munich. New registry system live in May 2004 removing 1 million in costs. 49
Acquisitions Pepper Technologies CEO s Report Purchased remaining 63%. Stakeholder Relationship Management systems that will bring added value to Computershare s global client base: Shareholders SRM Employees CRM Clients CRM. Innovative technology and unique approach to electronic stakeholder communications has already increased take-up rate for e-communications tenfold. Data mining and other technology tools helping companies to see their stakeholders as an asset rather than a cost. Taking Pepper to the World with over 7000 existing CPU clients great cross-sell opportunities. 50
Priorities For The Next 6 Months CEO s Report Manage the integration of new acquisitions to capitalise on synergies and deliver full value. Clearly define our product offerings. Consolidate sales/marketing and business development teams in all regions. Focus effort in each region to achieve maximum cross-sell opportunities. To bring Europe s contribution in line with other regions. 51
Outlook CEO s Report Assumptions Current levels of M&A, IPO and other Corporate Action activities are sustained. No change in interest rates. Fluctuations in currency are within +/- 10%. Revised EBITDA guidance for full year estimated to be in a range of $170m - $190m 52
Appendix A Revenue Breakdown by Country 53
Competitive Environment Clients Competitors Australia New Zealand Hong Kong UK Ireland South Africa USA Canada 1,173 263 433 685 181 748 1,246 2,189 APRL Lloyds, Capita BoNY, DST, (Equiserve), Mellon CIBC Mellon 54
Australia Half Year Comparison $AUDm Total Revenue $AUDm Revenue Breakdown 98.3 97.3 103.9 86.8 86.6 38.9 36.5 35.2 25.8 28.3 26.8 13.0 18.3 15.6 20.7 4.5 5.6 0.5 0.8 1.4 2.5 1.3 1.5 1H'02 2H'02 1H'03 2H'03 1H'04 Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'03 2H'03 1H'04 *Excludes revenues from Georgesons. 55
New Zealand Half Year Comparison $AUDm Total Revenue $AUDm Revenue Breakdown 7.1 7.2 7.6 7.3 6.3 4.2 4.1 4.2 2.4 1.6 2.2 0.9 0.4 0.7 0.1 0.1 0.2 0.1 1H'02 2H'02 1H'03 2H'03 1H'04 Register Main Corp Actions Margin Income Recoveries Other 1H'03 2H'03 1H'04 56
Hong Kong Half Year Comparison $AUDm Total Revenue $AUDm Revenue Breakdown 15.9 13.0 13.3 11.3 11.8 12.3 9.7 9.0 3.6 1.5 2.8 0.1 1H'02 2H'02 1H'03 2H'03 1H'04 Register Main Corp Actions Other 1H'03 2H'03 1H'04 57
United Kingdom Half Year Comparison $AUDm 104.0 Total Revenue $AUDm Revenue Breakdown 97.6 95.6 91.2 84.5 40.6 37.8 34.2 16.2 15.1 13.3 12.0 13.3 11.4 17.9 18.3 17.0 6.0 5.7 4.9 4.6 1.6 1.4 1H'02 2H'02 1H'03 2H'03 1H'04 *Excludes revenues from Georgeson. Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'03 2H'03 1H'04 58
Ireland Half Year Comparison $AUDm Total Revenue $AUDm Revenue Breakdown 8.2 3.8 6.7 6.1 6.1 3.2 2.9 4.9 1.6 1.1 1.0 1.2 0.2 0.5 0.7 0.4 0.3 0.3 0.5 1H'02 2H'02 1H'03 2H'03 1H'04 Register Main Corp Actions Margin Income Recoveries Non Registry 1H'03 2H'03 1H'04 59
South Africa Half Year Comparison $AUDm Total Revenue $AUDm Revenue Breakdown 18.0 18.7 15.5 16.1 16.7 13.3 9.9 11.5 0.6 0.2 0.7 0.7 0.8 0.6 0.9 0.9 0.8 1H'02 2H'02 1H'03 2H'03 1H'04 *Excludes revenues from Georgesons. Register Main Corp Actions Margin Income Recoveries 1H'03 2H'03 1H'04 60
United States Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 74.7 72.4 25.6 55.5 60.3 58.0 20.4 19.5 18.6 22.8 23.6 11.7 7.0 7.9 1H'02 2H'02 1H'03 2H'03 1H'04 3.8 2.8 3.2 2.0 2.6 2.1 0.1 0.1 Register Main Corp Actions Margin Income Recoveries Non Registry Other 0.1 *Excludes revenues from Georgesons. 1H'03 2H'03 1H'04 61
Canada Half Year Comparison $AUDm Total Revenue $AUDm Revenue Breakdown 79.0 78.3 77.8 41.7 65.2 68.4 39.0 37.6 12.1 10.8 10.0 13.7 4.1 5.2 7.7 6.2 6.0 6.1 4.9 5.1 0.2 0.9 1H'02 2H'02 1H'03 2H'03 1H'04 *Excludes revenues from Georgesons. Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'03 2H'03 1H'04 62