Perpetual Limited · ASX:PPT
Perpetual — FY2004 Earnings Presentation
52 slides from Perpetual's earnings presentation, Aug 24, 2004
Slide 1: 2004 Annual Results Analyst Briefing
2004 Annual Results Analyst Briefing 24 August 2004 0
Slide 2: Agenda
Agenda • 2004 highlights – David Deverall • Financial results – John Nesbitt • Capital management – John Nesbitt • Corporate strategy – David Deverall • Outlook – David Deverall 1
Slide 3: A very good result
A very good result June 2004 June 2003 % Change Operating profit after tax $88.2m $68.2m +29% Profit after tax $90.4m $78.2m +16% EPS (excl gains on 232.2¢ 180.6¢ +29% investments) Dividend per share 200 ¢ 180¢ +11% 2
Slide 4: Track record of continued profit growth
Track record of continued profit growth Operating Profit after Tax EPS* Annual Annual growth growth 250¢ $100M 232 30.2% 28.9% 88.2 80 200 181 68.2 156 60 58.7 150 40.7 109 40 100 30.7 84 20 50 0 Jun Jun Jun Jun Jun 0 00 01 02 03 04 Jun Jun Jun Jun Jun 00 01 02 03 04 *Calculated using operating prof
Slide 5: Revenues up 10% driven by strong growth in asset volumes
Revenues up 10% driven by strong growth in asset volumes Funds Under Advice & Funds Under Management Funds Under Administration Administration Wealth Management Corporate Trust* Wealth Management $25B $10B $125B 21.7 112.4 Preliminary 20 19.4 Funding 8 100 17.4 87.1 15.6 6.6 6.2 6.0 15 6 5.8 75 5.1
Slide 6: All operating divisions performing well
All operating divisions performing well • Wealth Management – up strongly -Continued outstanding investment performance -Good funds flows and revenue growth -Strong cost management post integration • Corporate Trust - up -Securitisation volumes and revenues up strongly -Investment of people in new b
Slide 7: 26% growth in EBITDA
26% growth in EBITDA EBITDA EBITDA June 2004 June 2003 % Change Wealth Management $115.4m $91.6m +26% Corporate Trust $25.9m $23.6m +10% Group unallocated $2.3m ($1.6m) - TOTAL $143.6m $113.6m +26% 6
Slide 8: Strong growth for Wealth Management
Strong growth for Wealth Management • Cost saving targets achieved • Continued excellent investment performance - numerous awards • Funds under management up 25% • Successful launch of WealthFocus and other products • Dedicated wholesale client team • Good growth in advice businesses 7
Slide 9: Wealth Management EBITDA up 26%
Wealth Management EBITDA up 26% June 2004 June 2003 % Change Revenues Perpetual Investments $177.3m $158.0m +12% Private Clients $54.5m $51.9m +5% Wilson Dilworth $14.0m $13.6m +3% Total Revenues $245.8m $223.6m +10% Expenses $130.4m $132m (1%) EBITDA $115.4m $91.6m +26% 8
Slide 10: Superior investment performance in Australian Equities
Superior investment performance in Australian Equities Excess over benchmark (3 Year rolling excess performance) % Variance to Benchmark 10% 8 Australian Equities 5 3 0 -3 -5 Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar Jun 02 02 02 03 03 03 03 03 03 04 04 04 Benchmarks based on: • Australian Equitie
Slide 11: Performance well recognised by the market
Performance well recognised by the market Money Management / • Fund Manager of the Year 2004 ASSIRT Awards • Australian Equities Fund Manager of the Year 2004 • Fund Manager of the Year 2003 Morningstar Awards • Australian Equities Fund Manager of the Year 2003 • Australian Multi-Sector Fund Manager
Slide 12: Funds under management up 25%
Funds under management up 25% FUM Balance ($B) $22B 21.7 21.7 Diversified 20 19.4 Institutional & Property Mortgages, 18 17.4 Fixed Interest, 16 15.6 Cash International Retail Equity 14 12 11.6 10 8 Australian Equities 6 Masterfund 4 2 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 04 11
Slide 13: $1.5B in net inflows
$1.5B in net inflows June 2004 FUM Net inflows Other* June 2003 FUM Retail $6.6B ($0.1B) $0.7B $6.0B Masterfund $11.7B $1.0B $1.5B $9.2B Institutional $3.4B $0.6B $0.6B $2.2B All Channels $21.7B $1.5B $2.8B $17.4B Australian Equity $13.9B $1.3B $2.1B $10.5B Other $7.8B $0.2B $0.7B $6.9B All Asset $2
Slide 14: All advice and administration businesses experienced growth
All advice and administration businesses experienced growth Funds Under Advice and Administration ($B) $8B 6.6 6.2 6.0 IDPS/ 6 5.8 DIY/ 5.1 Other Trusts 4 & Estates Wilson Dilworth 2 Private Clients 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 13
Slide 15: Steady growth in Corporate Trust
Steady growth in Corporate Trust • Growth driven by strong Securitisation volumes -Securitisation revenues up 18% -Increase in offshore demand for RMBS -Bank of New York global alliance • Tighter criteria on corporate & structured finance business • Investing in capabilities -Administrative services
Slide 16: Corporate Trust EBITDA up 10%
Corporate Trust EBITDA up 10% June 2004 June 2003 % Change Revenues $49.4m $44.2m +12% Expenses $23.5m $20.6m +14% EBITDA $25.9m $23.6m +10% 15
Slide 17: Increasing offshore demand for RMBS
Increasing offshore demand for RMBS Issuances ($B) RMBS Issuances $50B 44.8 40 30.9 Offshore 30 28.1 20 16.0 13.7 10 Domestic 0 1999 2000 2001 2002 2003 No of deals 37 29 35 42 62 Source: S&P Note: Year to December 16
Slide 18: APRL joint venture up strongly
APRL joint venture up strongly • 26% increase in EBITDA • Strong increase in corporate actions • Acquisition of Pitcher Partners share registry business -Additional 100 new clients -Strong presence in Queensland • Industry conditions improving 17
Slide 19: APRL EBITDA up 26%
APRL EBITDA up 26% June 2004 June 2003 % Change Revenue $53.6m $48.9m +10% Expenses $38.3m $36.8m +4% EBITDA $15.3m $12.1m +26% 18
Slide 20: Agenda
Agenda • 2004 highlights – David Deverall • Financial results – John Nesbitt • Capital management – John Nesbitt • Corporate strategy – David Deverall • Outlook – David Deverall 19
Slide 21: A very good operational result
A very good operational result June 2004 June 2003 % Change Revenue $306.0m $278.8m +10% EBITDA $143.6m $113.6m +26% Operating profit before tax $126.0m $96.1m +31% (excl gains on investments) Operating profit after tax $88.2m $68.2m +29% (excl gains on investments) Profit After Tax $90.4m $78.2m +1
Slide 22: Strong cost management
Strong cost management Operating Expenses Operating Expense / Revenue Ratio 80% $250M 218 63.7 200 60.7 59.6 businesses Divested 60 165 53.4 162 156 150 40 100 Opex 20 50 0 Jun 01 Jun 02 Jun 03 Jun 04 0 Jun 01 Jun 02 Jun 03 Jun 04 21
Slide 23: Benefits of operational leverage
Benefits of operational leverage June 2004 June 2003 % Change Total revenue* $306.0m $278.8m +10% Staff related expenses $104.1m $103.2m +1% Admin & general expenses $58.3m $62.0m (6%) Total operating expenses* $162.4m $165.2m (2%) EBITDA $143.6m $113.6m +26% EBITDA / revenue margin 47% 41% *Revenue
Slide 24: A strong, clean balance sheet
A strong, clean balance sheet June 2004 June 2003 % Change Net assets $315.4m $287.4m +10% Investments at cost $60.1m $68.8m (13%) Investments at market value $109.5m $102.1m +7% Cash holdings $163.4m $113.2m +44% Key Financial Ratios Gross debt to book equity 14% 17% Interest coverage 57x 38x 23
Slide 25: Continuing to improve shareholder value
Continuing to improve shareholder value Return on Shareholders Equity 30% 29.3% 25.1% 25 23.9% 20 18.9% 17.4% 15 10 5 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 *Based on Operating Profit after Tax and average shareholders equity 24
Slide 26: Consistent track record of dividend growth
Consistent track record of dividend growth Dividend per share 200 200¢ 180 Special Dividend 160 150 150 130 100 110 Normal 85 Dividends 65 50 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Payout ratio 60% 58% 80% 87% 85% Franking credits after $16.5M $34.5M $37.9M $43.5M $51.8M final dividend 25
Slide 27: Agenda
Agenda • 2004 highlights – David Deverall • Financial results – John Nesbitt • Capital management – John Nesbitt • Corporate strategy – David Deverall • Outlook – David Deverall 26
Slide 28: Future dividend policy
Future dividend policy Future dividend policy • Strong cash generation Ordinary dividends of • Low capital expenditure 90% of NPAT before goodwill • Substantial franking credits amortisation and gains / losses on investments, High dividend pay-out ratio fully franked 27
Slide 29: Future gearing policy
Future gearing policy • Desire to have a balance sheet that, if rated, would have an investment grade rating • Reflects financial conservatism appropriate for a company involved in investment management and trust activities and supports business stability • Financial ratio guidelines: -Debt/Book equ
Slide 30: Capital requirements
Capital requirements Capital retained to provide for: • Regulatory capital requirements and contingency margin • Working capital requirements • Seed capital • Growth initiatives • Excess capital returned to shareholders • Funding is available if a significant value accretive acquisition is identifie
Slide 31: Special dividend of $2.00 per share
Special dividend of $2.00 per share • Additional Special dividend to be paid of $2.00 per share -$76.5 million fully franked -Franking balance reduces to $19 million after payment -Paid with the ordinary final dividend on 17 Sep 2004 • Why a special dividend? -Simple, cost effective -Tax certainty t
Slide 32: Surplus capital – ongoing review
Surplus capital – ongoing review • Capital requirements to be reviewed on an ongoing basis at least every 6 months • Subject to no alternative potential investment opportunities being available at the time, consideration will be given to returning any future surplus capital to shareholders 31
Slide 33: Agenda
Agenda • 2004 highlights – David Deverall • Financial results – John Nesbitt • Capital management – John Nesbitt • Corporate strategy – David Deverall • Outlook – David Deverall 32
Slide 34: An excellent foundation
An excellent foundation • Markets rebounded • Investor confidence returning External • Mandated growth in retirement savings • Securitisation volumes growing • Investment performance remains strong • Trusted brand Internal • Core businesses with strong market presence • Talented team keen to sustain
Slide 35: Our new Strategy
Our new Strategy Focus on our 4 sources II. Develop new growth of competitive I. Develop a more advantage balanced portfolio engines III. Fully engage the staff to deliver our strategy 34
Slide 36: Four sources of competitive advantage underpin our strategy
Four sources of competitive advantage underpin our strategy 1. The management of funds management teams, philosophies, and processes 2. Relationship management with financial planning community 3. A trusted brand 4. A long history as a leading provider of fiduciary services to individuals and corpor
Slide 37: 2005 Implementation: Develop a more balanced portfolio
2005 Implementation: Develop a more balanced portfolio • Continuing focus on costs • Trust industry opportunities • Full potential from Advice businesses • Broaden range of funds management products 36
Slide 38: Continuing focus on costs
Continuing focus on costs • Extract synergies from existing businesses • More variable cost structure -New remuneration policy • Shifting costs and investing in higher value adding activities -Asset management -Marketing -Product development and management -Strategy and project management -Wholesale
Slide 39: Trust industry opportunities
Trust industry opportunities • Enthusiastic participant in the Trust industry • Interested party in consolidation • Will only look to value accretive opportunities 38
Slide 40: Advice strategy: Priorities for 2005
Advice strategy: Priorities for 2005 • Expand product range and adjust pricing • Align staff capabilities with client needs • Expand marketing activities 39
Slide 41: Broaden range of funds management products
Broaden range of funds management products Add products • Growth pensions from existing • Managed discretionary accounts capabilities • Quantitative Investment market neutral • Mezzanine pooled fund Add products from new • Stock portfolio with capital protection capabilities • Property income fund •
Slide 42: 2005 Implementation: Develop new growth engines
2005 Implementation: Develop new growth engines • Build capability in new investment skill sets • Expand range of Corporate Trust services 41
Slide 43: Middle of the value chain will be squeezed
Middle of the value chain will be squeezed • Asset managers who can • Consolidated • Advisers and add alpha will differentiate reporting by dealers can craft themselves and charge a administrators value proposition premium becoming harder around provision to differentiate of tailored, trusted financ
Slide 44: Build capability in new investment skill sets
Build capability in new investment skill sets High Low Skill set breadth breadth Domestic Small Hedge Private Broad Styles Stock Picking Caps Funds Equity Mortgage Mortgages Mezz Lending Debt Recently LPT Stock Picking Global Domestic added capability Infrastructure Infra- Investing structure Quanti
Slide 45: Expanding our range of Corporate Trust services
Expanding our range of Corporate Trust services Lending value chain Loans Securitisation Distribution Origination Processing / (Funding) Administration Developing new services Skill sets we currently possess 44
Slide 46: 2005 Implementation: Fully engage the staff to deliver our strategy
2005 Implementation: Fully engage the staff to deliver our strategy • New remuneration policy • Single premises • Leadership team development 45
Slide 47: Staff remuneration aligned with shareholders
Staff remuneration aligned with shareholders • Incentives are a significant part of our remuneration • Paid from profits - not budgeted as fixed costs • Reward people when performance significantly exceeds expectations • Equity participation to encourage ownership and long term focus 46
Slide 48: New premises
New premises • Improved working environment for our staff • Better customer experience • Improved efficiencies 17 floors & 3 buildings <10 floors & 1 building 47
Slide 49: Leadership team development
Leadership team development • Senior roles filled • Formation of Senior leadership team • Refreshed values • Strategy development 48
Slide 50: A busy year
A busy year q Corporate strategy in place q Expanded asset management footprint q New products created q Advice strategy being implemented q Integrated Wealth Management division q Capital management policy in place q New remuneration policy in place q Refreshed corporate values q New premises being
Slide 51: Agenda
Agenda • 2004 highlights – David Deverall • Financial results – John Nesbitt • Capital management – John Nesbitt • Corporate strategy – David Deverall • Outlook – David Deverall 50
Slide 52: Good start to 2005
Good start to 2005 • Starting FUM and FUA balances position us for continued increase in revenues • Continuing focus on costs At this early stage of the year: • Expect improvement in Operating Profit after Tax in excess of 10%, subject to market conditions 51