2008 interim results
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2008 Interim Results. Investor Presentation CEO, Tony Robinson 20 February 2008. Agenda. CEO Overview Business Unit Performance Strategic Outlook. Operational Overview. Strong operational performance Building funds flow capabilities Costs controlled. - PowerPoint PPT PresentationTRANSCRIPT
2008 Interim ResultsInvestor Presentation
CEO, Tony Robinson 20 February 2008
4
Agenda
CEO Overview
Business Unit Performance
Strategic Outlook
5
Operational Overview
• Strong operational performance
• Building funds flow capabilities
• Costs controlled
A solid business with strong foundations
6
Financial Overview
• $34.6b in closing FUMA – small increase from net flows offset by fall in equity and property markets
• Underlying* EBITA of $22.7m – up 21% from 2H 06/07
• Underlying* Net Profit after Tax of $15.7m – up 22% from 2H 06/07
• Reported Net Profit after Tax of $5.7m – down on 2H 06/07 reflecting balance sheet revaluations (largely AIFRS)
• Interim dividend of 15 cents per share fully franked (stable)
• Strong balance sheet
A sound financial performance
* Underlying results exclude the impact of investment value write downs, PIPL acquisition and share agreement liability revaluations – see Appendix E
7
Underlying profits restored whilst investing in growth
Financial Overview
EBITA equates to profits before interest, tax, amortisation and asset sales* Underlying results exclude the impact of investment value write downs, PIPL acquisition, share agreement liability revaluations and PIPL restructuring costs – see Appendix E
H1 2008 H2 2007Change on
half (%)H1 2007
Change on pcp (%)
Underlying* EBITA $22.7m $18.7m 21% $23.4m -3%
Underlying* NPAT $15.7m $12.9m 22% $16.4m -4%
Reported NPAT $5.7m $8.3m -31% $14.1m -59%
Underlying* EPS (cents) 23.1 20.2 14% 25.8 -10%
Reported EPS (cents) 8.4 13.0 -35% 22.1 -62%
DPS (cents) 15.0 18.0 -17% 15.0 0%
Operating efficiency 66% 68% 2% 61% -5%
8
Funds growth – half on half
Positive net flows performance offset by market
$23.8b$26.8b
$30.5b $32.3b$34.6b$34.8b
$4.2b
$(3.9b) $(0.5b)
Jun-2005 Dec-2005 Jun-2006 Dec-2006 Jun-2007 Inflow s Outflow s Market Dec-2007
9
Gross Margin – half on half
Margin pressure offset by FUM growth and diversification
$53.6m$55.1m
$60.0m
$71.4m
$73.9m
$65.3m
0.47%
0.43%0.42%
0.41%
0.43%0.42%
Jun-2005 Dec-2005 Jun-2006 Dec-2006 Jun-2007 Dec-2007
Gross margin includes equity accounted contribution from PVM. Acquisition of an additional 2.3% PVM equity in March 2007 has no material impact
10
$25.4m$28.1m
$2.4m $2.8m
$6.6m$8.7m
$31.8m
$43.2m
$2.1m $2.3m $2.8m$5.1m $5.5m
$51.3m
$2.7m$1.8m $2.8m $3.1m
$5.0m $6.9m
$51.4m
Salaries Marketing Occupancy Computer Professional fees Other* Total
1H 2006/07 2H 2006/07 1H 2007/08
Operating Costs – by category
Investment in capability increases salary costs
* Other includes a component of shareholder liability revaluation which is not considered a significant item 1H 2007/08 $1.3m; 2H 2006/07 $2.2m; 1H 2006/07 nil
11
Assets
Perennial Investment Partners
IOOF Portfolio Solutions
Consultum Financial Advisers
Investor
IOOF Investor Solutions
Business unit
Business units and funds
Exposure across the value chain
Contribution not recorded in IOOF
Group FUMA
Retail FUA $7.5b Retail FUM $4.7b Retail FUM $3.2b
Wholesale FUM $19.2bFUMA contribution
Funds / Services
Aust Value
Aust Fixed Int
Aust Growth
International
Asia
Real Estate
Pursuit / IPS
Lifetrack
Financial Advice
Dealer Group Support Services
Multi-Investment manager
Investment bonds
Private Clients
Asset Management
Administration Services
Financial Advice
Structured Products
12
16% compounding annual growth in FUMA since 2005
Funds by business
$11.7b $13.7b$17.0b $18.2b $19.2b
$1.7b$2.0b
$2.3b$2.6b
$3.0b
$4.6b
$4.7b
$4.9b$4.6b
$4.8b $4.7b
$5.8b
$6.3b
$6.4b$6.9b
$7.5b
$19.5b
$3.2b
$7.5b
$23.8b
$26.8b
$30.5b$32.3b
$34.8b $34.6b
Jun-2005 Dec-2005 Jun-2006 Dec-2006 Jun-2007 Dec-2007
Portfolio SolutionsInvestor SolutionsPerennial RetailPerennial Wholesale Total
13
Positive net flows offset by market
Funds growth by business
Net Flows
$34.8b $34.6b
$(486m)
$(103m)
$90m$493m
$(183m)
Jun-2007 PerennialWholesale
PerennialRetail
PortfolioSolutions
InvestorSolutions
Market Dec-2007
14
$19.2b
$3.2b
$4.7b
$7.5b
FUMA H1 2008 Asset Class H1 2008 Asset Class H2 2007
Funds by Asset Class
Fixed interest
Property
Aus Equities
Int’l Equities
Other 1%
Perennial Wholesale
Portfolio Solutions
51%
29%
6%
13%
$34.6b $34.8b
Investor Solutions
Stable exposure across a range of asset classes
Perennial Retail
Other 2%
51%
29%
6%
12%
$34.6b
15
Underlying earnings across the value chain
Business Contribution
EBITA equates to profits before interest, tax, amortisation and asset sales* Underlying results exclude the impact of investment value write downs, PIPL acquisition, share agreement liability revaluations and PIPL restructuring costs – see Appendix E
$m H1 2008 H2 2007 H1 2007Relative
contrib (%)
Perennial 9.9 8.1 6.4 44%
Portfolio Solutions 12.3 13.0 13.6 54%
Investor Solutions 8.7 9.9 8.7 38%
Consultum (1.0) (1.9) (1.7) -4%
Corporate (7.2) (10.4) (3.6) -32%
Underlying EBITA 22.7 18.7 23.4 100%
16
$15.7m
$5.7m
$9.6m$5.3m
$16.8m
$1.1m$2.1m $1.1m $0.1m
$4.4m
$19.8m$17.8m
$4.6m
$3.8m
$3.7m
2H 2007 Perennial Portfolio Solutions Investor Solutions Consultum Corporate 1H 2008
Corporate
Operating Costs by business
Central costs curbed to allow business investment
Consultum
Investor Solutions
Portfolio Solutions
Perennial
$51.3m $51.4m
17
Perennial
Highlights• Continuing to develop products and distribution
AustraliaOverseas
• Product Small Cap Global High Alpha
• Distribution Retail Irish Trust
USA
• Continued high levels of achievement as recognised within the industry…..
H1 2008 H2 2007 H1 2007Relative
contrib (%)Revenue ($m) 65.9 61.2 51.5 44%
Gross Margin ($m) 22.2 20.3 16.2 32%
Cost to Income Ratio 64% 63% 69% n/a
Underlying EBITA ($m) 9.9 8.1 6.4 44%
Funds Under Management ($b) 22.4 22.5 20.8 65%
18
Awards for Perennial
Best Fund Manager in Money Magazine's Best of the Best 2008 Awards
First for Fixed Interest in the Best Australian Fixed Interest Funds category
Second for our Balanced Funds the Best Growth Funds category
Second for the Value boutique in the Best Australian Shares Funds category
Third for the Growth boutique in the Best Australian Shares Funds category
The Australian Financial Review Smart Investor Blue Ribbon Award for Global Listed Property
Perennial Value Shares Wholesale Trust: Highly Recommended
Perennial Global Property Wholesale Trust: Highly Recommended
Perennial Growth Shares Wholesale Trust: Recommended
Perennial Value Shares Wholesale Trust: Highly Recommended
Perennial Global Property Wholesale Trust: Highly Recommended
Perennial Growth Shares Wholesale Trust: Recommended
Perennial Value Shares Wholesale TrustHighly Recommended
Perennial Global Property Wholesale TrustHighly Recommended
Perennial Growth Shares Wholesale TrustRecommended
Perennial Value Shares Wholesale TrustHighly Recommended
Perennial Global Property Wholesale TrustHighly Recommended
Perennial Growth Shares Wholesale TrustRecommended
19
Perennial Funds performance
Quartile
*Source: Mercer MPA Surveys (returns are excess over median Survey manager to 31 December 2007^ Perennial Value is above median over both periods against similar value managers
Median outperformance
2
2
4
4
1
1
5 year performance*1 year performance*
1
3
3
2
3
4
4
(5.5%)
(0.9%)
0.1%
(0.5%)
1.8%
7.1%
(7.6%)
1.4%
(2.6%)
(5.6%)
2.7%
(0.4%)
4.5%
Australian Lis ted Property
As ian Equities
Value Aus tralian Shares^
Aus tralian Fixed Interes t
International Equities
Global Property Securities
Growth Aus tralian Shares
Global Shares High Alpha • Perennial Real Estate performing well against other global listed property competitors
• Perennial Value performing well against other value manager competitors
20
Highlights
• Pursuit net inflows $241m for the half year - up $60m on second half of prior year and $228m on pcp
• 9 new dealer groups signed up
• Reinvigorated relationship with key distribution partners (e.g.Bendigo Bank)
• Projects and initiatives underway to gain efficiencies and improve service levels
Portfolio Solutions
H1 2008 H2 2007 H1 2007Relative
contrib (%)Revenue ($m) 60.5 58.7 57.4 40%
Gross Margin ($m) 32.1 30.8 29.7 46%
Cost to Income Ratio 62% 58% 54% n/a
Underlying EBITA ($m) 12.3 13.0 13.6 54%
Funds Under Administration ($b) 7.5 7.5 6.9 22%
21
Highlights
• Strategic review of all existing product sets
• Reinvigorating investment bond capabilities
• Improved marketing and distribution of Multi Manager capabilities
Investor Solutions
H1 2008 H2 2007 H1 2007Relative
contrib (%)Revenue ($m) 19.8 18.9 17.9 13%
Gross Margin ($m) 14.0 14.0 13.2 20%
Cost to Income Ratio 40% 32% 36% n/a
Underlying EBITA ($m) 8.7 9.9 8.7 38%
Funds Under Management ($b) 4.7 4.8 4.6 14%
22
Highlights
• Developed a market leading software offering through XPLAN
• New adviser focussed "business to business" value proposition has been well received
• Increased media presence and market exposure
• On track to reach 120+ advisers by year end
Consultum
H1 2008 H2 2007 H1 2007Relative
contrib (%)Revenue ($m) 17.2 14.5 17.0 11%
Gross Margin ($m) 1.4 0.9 1.1 2%
Cost to Income Ratio 132% 202% 157% n/a
Underlying EBITA ($m) (1.0) (1.9) (1.7) -4%
Funds Under Advice* ($b) 2.3 1.9 n/a n/a
* Not included in IOOF Group aggregate FUMA
23
Progress Summary 2007/08
• Sound underlying result - reported profitability distorted by AIFRS driven volatility
• Restores profitability following the impact of 2H 2007 PIPL acquisition and 1H 2008 adverse market conditions
• Costs kept to 2H 2007 levels whilst maintaining an investment in the future
• Encouraging trends in Portfolio Solutions and Perennial Retail net flows
24
Strategic Outlook – 2008/09
• Businesses will continue to develop capability and products
• IOOF will use its operating capability and strong balance sheet to pursue acquisition opportunities
25
Questions?
26
Appendix A - Underlying Cash Earnings & EBITA
EBITA equates to profits before interest, tax, amortisation and asset sales* Underlying results exclude the impact of investment value write downs, PIPL acquisition, share agreement liability revaluations and PIPL restructuring costs – see Appendix E
$m H1 2008 H2 2007 H1 2007 Change on pcp (%)
Gross margin 70.3 67.3 61.5 14%
Non operating income 3.6 3.6 5.0 -28%
Share of net profits from PVM 3.6 4.1 3.7 -3%
Operating expenses (51.4) (51.3) (43.2) -19%
Underlying* Cash earnings 26.1 23.7 27.1 -4%
Dep'n and Amort'n of DAC (2.2) (2.9) (2.4) 6%
Share based payments (1.7) (1.1) (1.3) -31%
Provision for doubtful debts 0.6 (1.0) - 100%
Underlying* EBITA 22.7 18.7 23.4 -3%
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Appendix B - Statutory Accounts reconciliation
*Adjustments consist of de-consolidating entries
6 months ending December 2007Statutory financials
Benefit funds
Adjust*Corporate financials
Management fees & Commission revenue 153.4 (9.8) - 143.6
Commissions and other direct expenses (102.7) 29.3 - (73.3)
Gross margin 50.7 19.6 - 70.3
Non operating income 40.1 (37.0) 0.5 3.6
Share of Net profits from PVM 3.6 - - 3.6
Operating expenses (51.5) 0.0 - (51.4)
Depreciation of assets (0.8) - - (0.8)
Amortisation of DAC (1.5) - - (1.5)
Provision for doubtful debts 0.6 - - 0.6
Employee share plans (1.7) - - (1.7)
Underlying EBITA 39.5 (17.4) 0.5 22.7
Amortisation of intangible assets (0.7) - - (0.7)
Profit / (Loss) on assets (12.8) 12.7 - (0.1)
Interest expense (0.3) - - (0.3)
Profit before tax and sig. items 25.7 (4.6) 0.5 21.6
Significant items (10.0) - - (10.0)
Profit before tax 15.7 (4.6) 0.5 11.5
Income tax (8.4) 4.1 - (4.3)
NPAT 7.2 (0.5) 0.5 7.2
OEI (1.5) - - (1.5)
NPAT attributable to shareholders 5.7 (0.5) 0.5 5.7
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Appendix C – Balance Sheet
$mAIFRS
H1 2008CorporateH1 2008
CorporateH2 2007
Tangible Assets 1,344.8 145.0 151.9
Intangible Assets 199.6 199.6 197.2
Total Assets 1,544.4 344.6 349.1
Member liabilities (1,170.6) - -
Total Liabilities (1,320.6) (116.5) (154.6)
Equity 223.8 228.1 194.5
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Appendix D – Cash Flow
$mAIFRS
H1 2008CorporateH1 2008
CorporateH1 2007
Opening cash 509.3 39.5 91.4
Net operating in/(out) flows 152.2 31.8 10.8
Net financing in/(out) flows (10.0) (10.0) 11.2
Net investing in/(out) flows (1.8) (1.2) (67.3)
Closing cash 649.7 60.1 46.1
30
Appendix E - Significant items excluded from calculation of underlying results
• PIPL option holders – value of options previously held by certain key PIPL executives
• PIPL acquisition costs – recognises the movement in present value of the probable future settlement liability upon finalisation of the acquisition of PIPL minorities in 2009
• PIPL share agreements liability - relates to IOOF's commitment to provide liquidity, under certain circumstances, in the vested shares held by parties previously classified as minority interests in two Perennial subsidiaries
• PIPL restructuring – costs incurred realigning retail activities within PIPL following full ownership
• Investment sale/revaluation losses – disposal or write down on alliance investments which are no longer strategically congruent
Significant items ($m) H1 2008 H2 2007 H1 2007
PIPL option holders - - (0.8)
PIPL Acqn costs (2.4) (2.6) -
PIPL share agreements liability reval (5.3) (2.0) -
PIPL restructuring - - (2.1)
Investment sale/revaluation losses (2.3) - -
Significant items before tax (10.0) (4.6) (2.9)
Income tax impact - - 0.6
Significant items after tax (10.0) (4.6) (2.3)