Perpetual Limited · ASX:PPT
Perpetual — H1 2009 Earnings Presentation
45 slides from Perpetual's earnings presentation, Feb 18, 2009
Slide 1: 2009 Half Year Results
For personal use only 2009 Half Year Results Analyst and shareholder briefing 18 February 2009
Slide 2: Agenda
Agenda For personal use only Group highlights – David Deverall Financial results – Roger Burrows Outlook – David Deverall 1
Slide 3: Agenda
Agenda For personal use only Group highlights – David Deverall Financial results – Roger Burrows Outlook – David Deverall 2
Slide 4: Overview
Overview For personal use only Financial performance in line with consensus Very challenging operating environment − rapid and sustained deterioration of our key revenue drivers − further deterioration in investor confidence Proactively managing our costs and capital − significant cost managem
Slide 5: Profit result in line with market consensus
Profit result in line with market consensus For personal use only Dec 2008 Dec 2007 Change $M $M % Operating profit before tax 62.1 114.2 (46) Operating profit after tax 41.6 79.3 (48) Gain / (loss) on sale of investments(1) (4.1) 21.1 ~ EMCF losses(2) (14.9) (12.8) ~ Restructuring (8.4) - ~ Net pro
Slide 6: Rapid and sustained deterioration of our key revenue driver
Rapid and sustained deterioration of our key revenue driver For personal use only ASX All Ordinaries Index (2004-2009) 7,500 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 4 5 6 7 8 4 5 6 7 8 9 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 an an an an an an ul ul ul ul ul -J -J -J -J -J -J -J
Slide 7: Funds management industry is in outflow due to applications drought
Funds management industry is in outflow due to applications drought For personal use only Total market quarterly flows since March 2004 Net flows $B 35 32 30 Redemption rate has remained constant 25 20 Applications rate is down 15 in response to market conditions: “dash for cash” 10 5 0 -5 -4 05
Slide 8: Marked deterioration in adviser sentiment
Marked deterioration in adviser sentiment For personal use only Adviser sentiment “In your role as a financial planner, are times good or bad for you % right now?” 50 45 40 35 30 25 20 15 10 5 0 Very bad Bad Average Good Very good Apr-08 Oct-08 Dec-08 Source: Wealth Insights, Adviser Sentiment, Dece
Slide 9: Securitisation new issuance remains largely closed
Securitisation new issuance remains largely closed For personal use only Australian RMBS issuance (excluding repos) 16 14 RMBS by Australian Issuers 12 10 (A$B) 8 6 4 2 0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov 2006 2007 2008 Source: Perpetual and Standard & Poor’s 8
Slide 10: Operating profit before tax down 46%
Operating profit before tax down 46% For personal use only Dec 2008(1) Dec 2007(2) Change Six months ended $M $M % Perpetual Investments 35.7 88.9 (60) Perpetual Private Wealth 17.4 25.8 (33) Perpetual Corporate Trust 20.0 13.6 47 Group and Support Services (11.0) (14.1) 22 Total operating profit be
Slide 11: Perpetual Investments operating profit before tax down
Perpetual Investments operating profit before tax down For personal use only Dec 2008(1) Dec 2007(2) Change Six months ended $M $M % Perpetual Investments 35.7 88.9 (60) Perpetual Private Wealth 17.4 25.8 (33) Perpetual Corporate Trust 20.0 13.6 47 Group and Support Services (11.0) (14.1) 22 Total o
Slide 12: Perpetual Investments FUM totalled $24.6 billion at December 2008
Perpetual Investments FUM totalled $24.6 billion at 31 December 2008 For personal use only Industry in outflow Funds under June 2008 Net flows Other Dec 2008 management $B $B $B $B Retail 7.2 (0.4) (1.1) 5.7 Intermediary 14.8 (0.9) (2.5) 11.4 Institutional 8.3 0.5 (1.3) 7.5 All channels 30.3 (0.8) (
Slide 13: Strong fundamentals despite market turmoil
Strong fundamentals despite market turmoil For personal use only Solid investment performance from key funds Australian Trend of flows to key funds improving over the last quarter Equities Continued investment out-performance Global Equities Won new $125m institutional mandate in Feb 2009 12
Slide 14: Strong investment performance from international
Strong investment performance from international Dec-08 Perpetual’s International Share Fund one year rolling excess returns Nov-08 Oct-08 Sep-08 Aug-08 Jul-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 Aug-07 Jul-07 Jun-07 May-07 Apr-07 Mar-07 Feb-07 Jan-07 Dec-06 Nov-06
Slide 15: Strong fundamentals despite market turmoil
Strong fundamentals despite market turmoil For personal use only Solid investment performance from key funds Australian Trend of flows to key funds improving over the last quarter Equities Continued investment out-performance Global Equities Won new $125m institutional mandate in Feb 2009
Slide 16: Operating environment remains challenging for second half of 2009
Operating environment remains challenging for second half of 2009 For personal use only Dec 2008 Dec 2007 Change $B $B % FUM position Perpetual Investments FUM 24.6 37.2 (34) Continuation of domestic and global market uncertainty Outlook Suits Perpetual’s investment style Medium to long-term p
Slide 17: Perpetual Private Wealth operating profit before tax down
Perpetual Private Wealth operating profit before tax down For personal use only Dec 2008(1) Dec 2007(2) Change Six months ended $M $M % Perpetual Investments 35.7 88.9 (60) Perpetual Private Wealth 17.4 25.8 (33) Perpetual Corporate Trust 20.0 13.6 47 Group and Support Services (11.0) (14.1) 22 Tota
Slide 18: Perpetual Private Wealth FUA – reflects investor attitude
Perpetual Private Wealth FUA – reflects investor For personal use only attitude June 2008 Net flows Other(1) Dec 2008 $B $B $B $B Financial Advisory - Superannuation 2.7 - (0.4) 2.3 - Non-superannuation 2.0 (0.1) (0.3) 1.6 4.7 (0.1) (0.7) 3.9 Fiduciary Services - Philanthropic 1.1 - (0.2) 0.9 - Trus
Slide 19: Consolidation opportunities for Perpetual Private Wealth
Consolidation opportunities for Perpetual Private Wealth For personal use only Maintaining client base despite tough market conditions Key initiatives Well-advanced in smaller ‘bolt on’ acquisitions Streamlining processes to improve client service Second half net flows typically stronger tha
Slide 20: Perpetual Corporate Trust operating profit before tax is up
Perpetual Corporate Trust operating profit before tax is up For personal use only Dec 2008(1) Dec 2007(2) Change Six months ended $M $M % Perpetual Investments 35.7 88.9 (60) Perpetual Private Wealth 17.4 25.8 (33) Perpetual Corporate Trust 20.0 13.6 47 Group and Support Services (11.0) (14.1) 22 To
Slide 21: Perpetual Corporate Trust FUA maintained
Perpetual Corporate Trust FUA maintained Corporate Trust Funds under administration Corporate Trust Funds Under Administration For personal use only $B $B $B 250 246.1 Funds under administration 222.9 210.1 CMBS and ABS 205.7 200 RMBS - non bank 150 100 Repo 50 RMBS - bank 0 Jun 07 Dec 07 Jun 08 Dec
Slide 22: Perpetual Corporate Trust holding up well
Perpetual Corporate Trust holding up well For personal use only Greater contribution to group profitability and insulation from equity market related revenue declines Continue to be the leading trustee for all new issuances Key initiatives Appointed by one of the leading Australian banks to ma
Slide 23: Agenda
Agenda For personal use only Group highlights – David Deverall Financial results – Roger Burrows Outlook – David Deverall 22
Slide 24: Result reflects lower revenue offset by reductions to the expense base
Result reflects lower revenue offset by reductions to the expense base For personal use only Dec 2008(1) Dec 2007(2) Change Change Six months ended $M $M $M % Total revenue 194.6 261.2 (66.6) (25) Operating expenses 113.6 132.7 19.1 14 EBITDA 81.0 128.5 (47.5) (37) Depreciation and amortisation 6.1
Slide 25: Perpetual Investments operating profit before tax down
Perpetual Investments operating profit before tax down For personal use only Dec 2008 Dec 2007 Change Change Six months ended $M $M $M % Total revenues(1) 105.4 158.3 (52.9) (33) Operating expenses(1) 56.3 61.0 4.7 8 Equity remuneration amortisation 11.1 7.1 (4.0) (56) Depreciation and amortisation
Slide 26: Perpetual Private Wealth operating profit before tax down
Perpetual Private Wealth operating profit before tax down For personal use only Dec 2008 Dec 2007 Change Change Six months ended $M $M $M % Total revenues 45.0 54.6 (9.6) (18) Operating expenses 25.3 27.3 2.0 7 Equity remuneration amortisation 1.2 0.7 (0.5) (71) Depreciation and amortisation 1.1 0.8
Slide 27: Perpetual Corporate Trust operating profit before tax up
Perpetual Corporate Trust operating profit before tax up For personal use only Dec 2008 Dec 2007 Change Change Six months ended $M $M $M % Total revenues 41.0 41.6 (0.6) (1) Operating expenses 19.3 26.4 7.1 27 Equity remuneration amortisation 0.1 0.4 0.3 75 Depreciation and amortisation 1.6 1.2 (0.4
Slide 28: Revenue drivers: strong correlation with market movements
Revenue drivers: strong correlation with market movements For personal use only 100% Other Other Other Mortgage Services Mortgage Services Mortgage Services Revenue Corporate Trust 80 Corporate Trust Corporate Trust relationship to equity markets is Non-equity Non-equity related related Non-equity
Slide 29: Overall expenses down 10% in the first half
Overall expenses down 10% in the first half For personal use only Dec 2008(1) Dec 2007(2) Change Six months ended $M $M % Perpetual Investments 69.7 69.4 1 Perpetual Private Wealth 27.6 28.8 (4) Perpetual Corporate Trust 21.0 28.0 (25) Group and Support Services 14.2 20.7 (31) Total expenses 132.5 1
Slide 30: Expense reductions remain on track
Expense reductions remain on track For personal use only 320 4 (39) 8 302 300 280 275 $M 260 240 269 220 234 200 June 2008 Depreciation smartsuper Reduction June 2009 and acquisition in cash current amortisation expenses expectation (1) Cash expenses Non-cash expenses (1) Based on current estimate a
Slide 31: Significant items as previously disclosed
Significant items as previously disclosed For personal use only Dec 2008 Dec 2007 Change $M $M % Operating profit after tax 41.6 79.3 (48) Gain / (loss) on sale of investments(1) (4.1) 21.1 ~ EMCF losses (14.9) (12.8) ~ Restructuring (8.4) - ~ Net profit after tax attributable to members 14.2 87.6 (
Slide 32: Significant items – gain/(loss) on sale of investments
Significant items – gain/(loss) on sale of investments For personal use only Dec 2008 Dec 2007 Change $M $M $M Sale of listed equity portfolio - 27.0 (27.0) Sale of investments in incubation funds (5.6) 2.9 (8.5) Impairment of certain securities within incubation (0.7) - (0.7) funds (unrealised) Gai
Slide 33: EMCF losses
EMCF losses For personal use only 6mths to 6mths to 7mths to Dec 2007 Dec 2008 Jan 2009 $M $M $M Realised losses Structured securities (5.7) - - Lehman Brothers - (3.0) (3.0) Hedging - 0.1 (0.8) Mark to market losses (12.6) (18.4) (20.4) Loss before tax impact (18.3) (21.3) (24.2) Tax benefit
Slide 34: EMCF portfolio remains strong
EMCF portfolio remains strong For personal use only High quality portfolio remains in place Significant level of maturities in next 2-3 years $M Maturity profile of credit securities % 6mths to June 2009 100 45 12mths to June 2010 360 40 35 12mths to June 2011 485 30 Total maturities by June 201
Slide 35: Strategy for structured products
Strategy for structured products For personal use only Continued de-risking of portfolio Exact Market All new cash flows invested into ‘pure’ cash Cash Fund (EMCF) Risk assets reducing as securities mature and re-invested in cash Perpetual Immediate suspension of new series for the short-med
Slide 36: Balance sheet remains strong
Balance sheet remains strong For personal use only Dec 2008 June 2008 Change $M $M % Cash holdings 107.7 183.1 (41) Investments at market value 60.5 77.0 (21) Liquid assets 168.2 260.1 (35) Net assets 261.0 314.4 (17) Key financial ratios Liquid assets per share $4.00 $6.19 Gross debt(1) to (book eq
Slide 37: Revised dividend policy prudent and appropriate
Revised dividend policy prudent and appropriate For personal use only A policy with a payout ratio of more than 100 per cent of NPAT is unsustainable over the medium to long term 2008 final dividend payout ratio exceeded 140 per cent of second Previous half NPAT dividend policy Current market
Slide 38: Perpetual's dividend payout ratios have historically tended to be 80-100% of NPAT
Perpetual’s dividend payout ratios have historically tended to be 80-100% of NPAT For personal use only Dividend payout ratio Dividend as a per cent of NPAT 160 140 120 100 80 60 40 20 0 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 Note: excludes special dividends paid in 2005 and 2006 of 100 cps ea
Slide 39: Agenda
Agenda For personal use only Group highlights – David Deverall Financial results – Roger Burrows Outlook – David Deverall 38
Slide 40: Advisers are sticking to the basics of Australian equities and cash
Advisers are sticking to the basics of Australian equities and cash For personal use only Asset class usage “Please indicate which two asset classes you are writing most heavily in the current financial environment” % 70 60 50 40 30 20 10 0 s st s it s ) er ti e sh re ied i tie ve s ed ge us th u i
Slide 41: Cash is becoming less attractive relative to dividends
Cash is becoming less attractive relative to dividends For personal use only Official cash rate % RBA official cash rate is 8 3.25 per cent (Feb ’09) 7 6 Estimated forward gross 5 yield of S&P ASX300 is 4 3 7.9 per cent (Jan ’09) 2 1 Estimated forward gross 0 yield of Perpetual’s Jan-01 Jan-02
Slide 42: Perpetual is the best regarded fund manager brand amongst advisers
Perpetual is the best regarded fund manager brand amongst advisers For personal use only Net positive perception % 40 35 30 Wealth Insights’ brand tracking research Wealth Insights surveyed advisers in Dec 2008. Positive 25 association with Perpetual has increased throughout the financial crisis. 20
Slide 43: Outlook
Outlook For personal use only Economic outlook continues to remain uncertain despite Government stimuli packages We are focussed on what we can control while markets remain turbulent – we have a strong balance sheet with low gearing – solid investment performance − our quality investment style t
Slide 44: 2009 Half Year Results
For personal use only 2009 Half Year Results Analyst and shareholder briefing 18 February 2009
Slide 45: Disclaimer
Disclaimer For personal use only Important information While this information has been prepared in good faith and with reasonable care, no representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates, opinions or other information c