Interim Results 2003 Presentation 6 March 2003 1
Market Overview and Financial Results Tom Honan Chief Financial Officer 2
Summary of results Normalised EPS 0.8 cents EBITDA in line with forecast at $54.9 m Generated operating cash flows of $33.1 m Capital Expenditure of $11.5 m, 60% down on prior year Share Buy-Back - 18.7 m shares acquired Interim ordinary share dividend 2.5 cents, fully franked Net Debt - $74 m, Funding Capacity of A$250 m 3
Context of the Results 1H normalised EBITDA in line with forecast Revenues impacted by slow down in corporate actions activity and low interest rates Continued operating cost savings, but not as rapid as revenue declines Technology spend declines Capital expenditure down 60% Changed composition of Board increased Non-Executive Directors 4
This presentation is structured around the following framework Market Overview Financial Results CEO s Report 5
CPU Revenues are driven by multiple factors Market Overview Revenue type Revenue Driver Risk mitigation 2% 22% 8% 6% Register Maint. & Recoveries Margin Income Corporate Actions Non Registry 62% Register Maint. & Recoveries Corporate Actions Margin Income Non- Registry Growth in clients and holders Market conditions, M&A activity Interest rates, hedging balances Growth in nonregistry businesses Retain existing clients, win market share Win new business; link to key stakeholders, clients Hedging, flow on effort from Maintenance & Corp Actions Increase proportion on non-registry business Other 6
Global Equities Market Market Overview M&A Value of Transactions (US$m) Historical Equity Issuance Data M&A Number of Transactions 2,500,000.0 18,000 2,000,000.0 16,000 14,000 1,500,000.0 12,000 10,000 1,000,000.0 8,000 6,000 500,000.0 4,000 2,000 0.0 0 1H92 2H92 1H93 2H93 1H94 2H94 1H95 2H95 1H96 2H96 1H97 2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01 1H02 2H02 M&A Value of Transactions (US$m) (LHS) M&A Number of Transactions (RHS) Source: Thomson Financial 7
Market Overview Global Interest Rate Market % UK % US 8 8 6 6 4 4 2 2 0 1996 1997 1998 1999 2000 2001 2002 2003 0 1996 1997 1998 1999 2000 2001 2002 2003 % 8 Canada 6 4 2 0 1996 1997 1998 1999 2000 2001 2002 2003 8
Market Overview Financial Results CEO s Report 9
Group Financial Performance A$m s Financial Results Revenue 1H 02 2H 02 1H 03 Registry maintenance 177.4 169.5 168.0 Corporate actions 34.8 22.8 21.8 Margin income (including sharesave admin) 41.9 30.6 28.1 Non Registry fees/sales 77.4 76.1 75.2 Recoveries 59.5 65.3 49.3 Interest income 2.5 1.7 1.8 Other Total Revenue 3.0 396.5 18.5 384.5 4.5 348.7 Operating costs 323.5 309.9 293.8 EBITDA 73.0 74.6 54.9 Expenses Depreciation and amortisation 11.7 13.6 15.4 Amortisation of goodwill 15.0 14.9 16.2 Borrowing costs 6.9 3.3 3.8 Other 0.0 (1.5) (1.4) Non-recurring items 0.0 0.0 7.1 Pre tax Profit 39.4 44.3 13.9 Income tax 15.2 10.8 9.0 NPAT before OEI NPAT after OEI 24.2 24.5 33.6 46.8 4.8 3.9 Normalised NPAT after OEI 24.5 33.4 13.2 10
Half Year Comparison Financial Results A$m A$m Revenue Breakdown 339.6 414.7 396.5 384.5 348.7 177.4 169.5 168.0 77.4 76.1 75.2 71.9 79.7 73.0 74.6 54.9 34.8 22.8 21.8 41.9 30.6 28.1 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Non Registry Sales/Fees Revenue EBITDA 1H'02 2H'02 1H'03 11
Revenue Analysis Financial Results Total Revenue A$m Revenue Breakdown 35% 32% 51.6 57.0 59.4 20.7 25.8 21.4 28.0 13.7 13.7 15.3 13.3 33% 9.0 6.8 6.0 0.7 Asia Pacific Europe North America Register Main Corp Actions Margin Income Recoveries Non Registry Sales/Fees Asia Pacific Europe North America 12
Cost Analysis Financial Results A$m Operating Costs A$m Operating Cost Breakdown 335.0 323.5 309.9 293.8 149.6 141.0 136.5 267.7 64.8 61.2 49.7 44.9 40.6 36.7 41.0 38.9 40.4 23.0 15.718.0 10.7 5.9 8.6 Recov Exp Personnel Occupancy Other Direct Technology Corporate 1H'01 2H'01 1H'02 2H'02 1H'03 1H'02 2H'02 1H'03 13
EBITDA generated from diversified portfolio Financial Results A$m Total EBITDA EBITDA Breakdown 1H'03 71.9 79.7 73.0 74.6 18% 54.9 45% 37% 1H'01 2H'01 1H'02 2H'02 1H'03 Asia Pacific Europe North America 14
Analysis of NPAT Financial Results A$m 40 Tax losses written off Non-Recurring Actual NPAT Explanation Normalised NPAT for 1H 03 was $13.2m 30 16.2 2.5 20 33.4 10 18.3 20.4 24.5 4.7 4.6 0 3.9 1H'01 2H'01 1H'02 2H'02 1H'03 Note: Actual NPAT + Non-Recurring + Tax losses written off = Normalised NPAT 15
Effective Tax Rate Financial Results Headline effective tax rate 1H03 65.2% (1H02 38.6%) Normalised headline effective tax rate 1H03 30.3% (1H02 32.3%) Headline rate adversely affected by benefit of losses not brought to account $4.7 m (1H02 $2.5 m) Underlying effective tax rate 1H03 10.6% (1H02 26.5%) Trend in regard to both normalised headline and underlying effective tax rate is lower 16
Headcount Financial Results Total FTE's 5,000 4,300 4,966 5,321 5,165 4,000 3,000 2,000 2,053 2,591 1,000 0 June '98 June '99 June '00 June '01 June '02 Dec '02 17
Headcount * Financial Results Geographic Breakdown 1,200 1,000 800 600 400 200 894 154 77 1,183 74 655 548 1,038 Gross reduction of 296 FTE s Redundancy programs in Australia, UK and Canada Headcount increases in high growth businesses (i.e. Non Registry) 0 Australia Hong Kong N. Zealand UK Ireland S. Africa US Canada * Headcount excludes Technology and Corporate Services 18
Technology Costs Establishing Global Platform Financial Results 50 40 30 20 10 38.9 41.0 40.4 All A$m internal cash costs only All technology costs are expensed Major events: SCRIP implementation: US, Canada and Hong Kong Global Options system development (including BP) 0 1H'02 2H'02 1H'03 19
Analysis of Technology Costs Financial Results Category Cost Type External bureau 17% Admin 8% Development 36% Occupancy 3% External bureau 17% Computer Costs 9% Maintenance 21% Infrastructure 18% Personnel & on-costs 67% Comms 4% 20
Financial Results Analysis of Technology Costs A$m 60.0 50.0 40.0 30.0 20.0 10.0 54.7 52.0 48.4 15.8 11.0 8.0 8.2 6.2 8.6 11.9 15.3 10.3 1.8 1.0 3.7 17.0 18.5 17.8 External Bureau Infrastructure Maintenance Application Maintenance Administration Development 0.0 1H'02 2H'02 1H'03 21
Balance Sheet Strength Financial Results Net Debt / Equity = 11.8% Net Debt = A$ 74m Committed Debt facility = A$ 250m Net Debt / Equity has increased as a result of the share buy-back and increased dividends 22
Financial Results Cash Flow A$m 60.0 50.0 40.0 30.0 20.0 10.0 27.1 19.9 41.2 23.4 51.6 28.5 27.8 28.4 33.1 11.5 Gearing on a net debt to equity basis 11.8% Committed resources A$250m Debtors days outstanding have fallen from 70 to 69 days 0.0 1H'01 2H'01 1H'02 2H'02 1H'03 Cashflow from Ops Cap Ex - PPE 23
Capital Expenditure down 60% from Dec 01 Financial Results CPU Group Capex A$ M Occupancy 2.0 Document Services Facilities 0.1 Information Technology 8.8 Other 0.6 TOTAL 11.5 24
Working Capital Management Improving but not enough Financial Results 80 70 75 70 69 60 50 8% reduction in trade receivable balances 40 30 33 33 31 Receivable days Payable days 20 10 0 days FY'01 FY'02 1H'03 25
Financial Results Margin Income Interest Rate Sensitivity Margin Income Exposure 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 26
Risk Management - Funds Balances at 31 December 2002 Financial Results By Category By Country Dividend 15% Plans 21% US 12% Australia 1% Dissenter 11% Canada 42% Corporate Actions 17% Regular Trust 13% Broker Trust 23% UK 45% CY02 average balance range A$3.1b A$4.5b 27
Risk Management - Interest Rate Sensitivity Financial Results Exposure to interest rates 30% Effective hedging in place - both natural & synthetic 36% No exposure 34% Interest Rate Hedging Strategy: - Minimise downside risk in current low interest rate environment Policy: - Minimum hedge of 25% / Maximum hedge of 75% - Minimum term 1 year / Maximum term 5 years - Current hedging: 36% 28
Equity Management Fully Franked Interim Dividend of 2.5 cps Financial Results - EPS Normalised 0.8 cents - Dividend 5 cents per year - Current yield * 2.9% - Franking Benefit Total return 4.1% * Based on share price of A$ 1.70 29
Equity Management Share Buy Back Financial Results Commenced 11 th September 2002 Acquired 18,710,000 shares Average price A$2.05 Scheduled to complete 11 th March 2003 30
Financial Summary Financial Results Result in context of poor market conditions Further challenges ahead for full year Work on efficiency gains and new client wins will flow through 2H Capital management initiatives progressing Integration of financial systems and processes largely complete 31
Full year guidance Financial Results Looking ahead in these uncertain times we are able to forecast and control our operating costs but it is difficult to be certain of revenues. At present the company expects to achieve EBITDA results for the full year (excluding non-recurring items) that are in line with market expectations (ranging from $128 million to $145 million). 32
CEO s Report Chris Morris Chief Executive Officer 33
Market Overview Financial Performance CEO s Report 34
Managing our business through the cycle CEO s Report Financial Management Program Cost control Capital Management (Capex) Timely Reporting 35
Managing our business through the cycle CEO s Report Technology the key to our future Workflow Data Storage Systems (DSS) COSMOS Options Global Portal USA and Canada completed 36
Managing our business through the cycle CEO s Report Markets Technology Restructured division with separate P&L EFA Supplier of software to over 30 exchanges 37
Managing our business through the cycle CEO s Report Service Quality - Australia significant lift in service standards - North America top in recent surveys - Continued focus in all regions 38
Managing our business through the cycle CEO s Report People Accountability Hiring Quality People Graduate Program 39
Managing our business through the cycle CEO s Report Winning and Retaining Business BHP Billiton (Aus, SA, UK) Whitbread (UK) Fosters PNC (USA) David Jones Bank of China (HK) TAB Ltd China Telecom (HK) Promina Group (Royal & Sun Alliance) At what margins? 40
Managing our business through the cycle CEO s Report The current business environment is creating new opportunities Short-term issues are important but we will not mortgage our future with a single focus on short-term gains. 41
Appendix A Revenue Breakdown by Country 42
Competitive Environment Australia New Zealand Hong Kong UK Ireland South Africa USA Canada Clients 1,229 280 419 682 162 562 384 2,414 Competitors APRL Lloyds, Capita BoNY, DST, Mellon CIBC Mellon 43
Australia - Half Year Comparison A$m 85.7 Total Revenue 98.4 97.5 91.5 86.8 A$m 36.2 35.2 35.2 Revenue Breakdown 36.4 25.5 25.8 17.0 18.3 16.4 12.3 7.9 6.0 4.5 1.0 1.1 0.5 0.9 2.5 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'02 2H'02 1H'03 44
New Zealand - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 7.1 7.2 7.6 5.2 5.1 3.8 4.0 4.2 0.8 1.2 0.9 0.1 2.1 1.6 2.4 0.4 0.4 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries Other 1H'02 2H'02 1H'03 45
Hong Kong - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 15.9 13.0 13.2 12.3 8.9 10.0 9.2 3.0 2.3 3.6 1.7 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries Other 1H'02 2H'02 1H'03 46
United Kingdom - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 110.9 115.2 104.0 97.4 95.5 42.3 39.8 40.6 11.0 22.8 17.6 16.0 17.0 13.3 12.6 9.9 14.6 21.4 5.2 6.0 2.0 3.2 1.6 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'02 2H'02 1H'03 47
Ireland - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 8.1 6.8 5.9 4.1 4.9 4.8 3.3 3.1 2.8 1.9 0.2 0.2 0.1 0.4 0.9 1.1 0.1 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries Other 1H'02 2H'02 1H'03 48
South Africa - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 15.5 12.9 12.7 11.5 13.3 9.9 9.5 10.1 0.4 0.6 1.2 0.7 0.2 0.9 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries 1H'02 2H'02 1H'03 49
United States - Half Year Comparison A$m Total Revenue A$m Revenue Breakdown 79.1 74.7 72.4 30.6 51.9 55.5 26.4 24.3 23.0 22.5 20.4 15.7 10.9 2.2 4.6 2.0 4.6 4.2 3.0 7.0 1.1 0.1 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'02 2H'02 1H'03 50
Canada - Half Year Comparison A$m 94.3 Total Revenue A$m Revenue Breakdown 66.0 79.2 78.2 65.2 42.7 41.3 39.0 13.4 13.5 13.5 11.6 10.7 6.7 3.3 4.0 6.5 6.2 4.7 5.0 0.1 0.1 0.3 1H'01 2H'01 1H'02 2H'02 1H'03 Register Main Corp Actions Margin Income Recoveries Non Registry Other 1H'02 2H'02 1H'03 51